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For a long time Wall Street had only two concerns about the upcoming presidential election in the United States. Some feared a chaotic handover of power if US President Donald Trump lost and questioned the outcome. Others feared a victory for the Democrats, who with their rigid economic policies could jeopardize the valuation of US stocks.
All this time, the only desirable scenario for Wall Street seemed to be Trump’s re-election. After all, its impact on the markets has been quite impressive. The S & P500, the largest and most important benchmark in the United States, has risen 50% since taking office, despite the pandemic. The Dow Jones and Nasdaq also consistently held new records.
The US economy, however, still suffers from the effects of the crisis. Trump does not have the coronavirus under control, nor is a second stimulus package in sight. So now it’s not just voters who seem to be drifting further, as polls show. American investors have long since withdrawn their support for Trump.
All this time, the only desirable scenario for Wall Street seemed to be Trump’s re-election. But things have changed.
Investors change their minds
“The markets are currently not only betting on Biden, but also expecting a victory for the Democrats,” said Nigel Green, founder and director of financial advisory firm deVere Group. For essentially conservative Wall Street, this is a rather unusual change of mind. Biden promises billions of investments in the American economy, but at the same time insists on higher taxes and more regulation. “In general, a democratic victory means negative consequences for the markets, but these days nothing is normal,” Green points out.
Stability and security are what investors need now, says Chris Myers, president of financial advisory firm Signum Global Advisors. “People are just exhausted,” the financier told the NPR radio station. Stocks may have hit new all-time highs, but Wall Street is upset by Trump’s leadership style. “It is difficult to make medium- and long-term decisions on capital allocations when you don’t know what the White House will decide next.”
Investors are yearning for the so-called “blue wave,” the blue wave: a scenario in which the Democrats would not only win back the White House, but also the Senate. This would put the entire Congress in his hands. Economic policy decisions, such as the approval of a second stimulus plan worth billions, would be accelerated.
Fewer conflicts with China
In the interest of a sustainable economic recovery, according to Green, investors are now even willing to accept tax increases and significantly stricter regulation. A more reliable policy and a cooling of the trade dispute with China could even offset the burdens. In addition, Biden’s infrastructure package and higher government spending in general should ensure a recovery in the economy, and therefore corporate profits, for many companies. This could only result in long-term stock appreciation.
In fact, Deutsche Bank experts believe that Democrats’ victory is the most likely election outcome. So investments in cyclical stocks, meaning stocks benefiting from an economic recovery, are currently on the rise on Wall Street. As tech stocks and bonds continue to lose strength, interest in sectors such as renewables, building materials, and industrial stocks is increasing significantly. All of these sectors should benefit from a President Biden, who promises higher environmental standards and massive investments in American infrastructure.
The exchange hopes the Democrats will not only provide the new president, but also take back the Senate.
The financial elite makes a donation to Biden
Wall Street isn’t saving a dime to support Biden. Donations from the financial elite to the election campaign have rarely been as high as this year. For the first time in a decade, banks, investment firms, and the like have dug deeper into their pockets for Democrats than their Republican competition. This is noteworthy simply because, of all sectors, the financial sector stands out as the largest financier of political campaigns.
According to the Center for Responsive Politics (CRP), financial firms have donated $ 265 million to Democrats since the beginning of the year, nearly $ 100 million more than Republicans. “The financial sector is generally seen as a reliable source of money for the Republican Party,” says Sarah Bryner, director of research and strategy at the Center for Responsive Politics. “In this cycle, however, the trend has reversed.”
It may also depend personally on Joe Biden that Democrats currently enjoy such support from the financial sector. From the start of his political career until 2009, the now 77-year-old Democratic presidential candidate represented the interests of the state of Delaware, known for its corporate tax policy, in the Senate. He has made a name for himself as a lobbyist for financial institutions and credit card companies. “Delaware has a lot of big Wall Street companies that Biden has relationships with and that they trust him,” says research director Bryner. And that’s exactly why Trump gave his Democratic rival the nickname “Quid pro Joe”.
(rml / ers)
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