With less than seven weeks left until the hotly contested presidential election, Wall Street power brokers are hedging risk by making large political contributions to both sides. Judging by the political donations received by both candidates’ parties in 2024, the US financial industry is in a state of disrepair, even though the Democratic Party, led by Vice President Kamala Harris, receives similarly generous contributions from financial industry lobbyists. – Seems to be leaning toward former President Trump’s Republican Party.
According to data recently compiled by OpenSecrets, the financial sector, which includes the securities and investments, insurance, and real estate industries, has contributed $247 million to Republican candidates over the current two-year political cycle, compared with $247 million to Democrats. Donated $227 million.
Source: Reuters
Some Wall Street executives have made their preferred presidential candidates a public record. According to Reuters, Lazard CEO Peter Orszag and President Ray McGuire both said they personally supported Harris as a candidate. Notably, Mr. Orszag previously served in government roles under the Democratic Clinton and Obama administrations.
Similarly, Alex Soros, the son of longtime Democratic supporter George Soros, quickly rallied behind Harris shortly after President Joe Biden dropped out of the race, telling X to “unite around Harris. It’s time to defeat Trump.” His father, perhaps one of the most controversial figures in the financial industry, also supports Harris.
Mr. Trump, by contrast, has the support of Stephen Schwarzman, CEO of private equity giant Blackstone, who in May cited concerns about the economy, immigration and foreign policy. He announced his support for Trump. Also on the Trump campaign is Scott Bessent, CEO of Key Square Capital Management. According to Reuters, he is an unofficial adviser to the Trump campaign and could become Treasury secretary if Trump wins.
Bill Ackman, chief executive officer of Pershing Square Capital Management, said Trump was killed shortly after the former president was shot and injured in the ear at an outdoor rally in Pennsylvania in July, the first time an attempt was made on his life. supported. The billionaire hedge fund manager has emerged as a vocal supporter of Trump in 2021 after supporters of the former president stormed the U.S. Capitol and called for Trump’s resignation. This is a big reversal since January.
I intend to officially support @realDonaldTrump. Like many people, I came to this decision a while ago. @X My followers will already know this from my pro-Trump posts and criticisms of Trump. @POTUS Biden.
The reason I haven’t done it officially yet is because my…
— Bill Ackman (@BillAckman) July 14, 2024
Taming regulators
Political contributions from Wall Street executives do not automatically translate into electoral success for presidential candidates. Wall Street firmly supported Mitt Romney in 2012 and Hillary Clinton as presidential candidates in 2016, but both lost in the polls. That said, political contributions from corporations and business leaders are important because they provide a glimpse into the policy and regulatory environment desired by the industry.
Wall Street lenders who support President Trump are hoping the Republican candidate, who survived another deadly attack in Florida in September, will roll back some of the regulatory reforms initiated by the Biden administration. . Since Biden took office in 2021, the regulatory burden facing the financial industry has increased. Agencies such as the Securities and Exchange Commission and the Consumer Financial Protection Bureau, led by hard-line Biden nominees Gary Gensler and Rohit Chopra, have introduced aggressive enforcement campaigns against financial companies.
Meanwhile, the Federal Reserve’s set of banking rules known as the “Basel Endgame” devised by Vice Chairman Michael Barr, another Biden candidate, has drawn harsh criticism from banks. These regulatory changes, which could raise by a fifth the amount of capital that the largest U.S. banks must hold, have sparked so much opposition that lenders and their trade groups are taking the Fed to court. threatened to sue.
If elected, President Trump is likely to resume efforts to roll back Biden-era reforms. Specific policies he is likely to introduce include reducing protections for small investors and borrowers, allowing companies to raise capital without greater scrutiny, and improving environmental, social and governance (ESG) ) Includes reductions in incentives aimed at promoting investment.
Michael Faulkender, a former Trump finance official and current chief economist at the America First Policy Institute (AFPI), founded by former Trump administration officials, is particularly supportive of the move to scale back ESG investing. There is.
“ESG, as documented in the academic literature, is too much in the eye of the beholder,” he said. “Therefore, this system can and has been used to deviate from the fiduciary duties that asset managers have to their customers, and the continued strength of the U.S. financial system. It has distracted financial regulators from the safety and soundness standards that should be used to ensure that
Economists believe the economy will improve under Harris.
Economists at Goldman Sachs warned that U.S. GDP would take a hit if Donald Trump wins, in a note exploring the potential economic impact of a Republican or Democratic victory.
“If Trump wins in a landslide or with a divided government, the hit to growth from tougher tariffs and immigration policy would be due to most tax cuts,” Goldman economists including Alec Phillips wrote in a note. “We expect this to outweigh the positive fiscal impulse from retention.”
President Trump has promised to raise tariffs on Chinese goods and lower corporate taxes. Harris has described the plan as a tax on the middle class, but is generally expected to maintain President Biden’s policies to reduce dependence on Chinese imports while blocking access to advanced technology. has been done.
Economists believe immigration policy could ultimately make a difference in how the economy fares under each candidate. Many economists believe the surge in immigration has contributed to strong U.S. job growth in the face of high interest rates in recent years.
Economists at Goldman say, “If Harris wins, immigrants will contribute 10,000 more people a month to the labor force than if Trump wins with divided government, and more than if the Republicans win in a landslide.” We estimate that the number will increase by 30,000 people per month.”
Economists’ election predictions usually make for catchy headlines, but traders concerned about the election’s impact on the market are focusing on the Federal Reserve’s impending rate cut and what that will mean for assets in general. It is necessary to guess. Analysts believe this move could trigger a rise in both stocks and fixed income assets.
Economists at Goldman Sachs strategized about the potential economic impact of a Republican or Democratic victory in November’s election https://t.co/YxZarOblyq
— Bloomberg (@business) September 3, 2024
Anastasia Amoroso, head of investments at iCapital, argues that traders need not fear an impending election. In his view, the main impact on stock prices ultimately comes from earnings and Fed policy, not political turmoil.
Not only that, Amoroso drew attention to the fact that U.S. stocks typically deliver strong returns during election cycles. “Over the past eight election cycles, the S&P 500 has delivered median returns of +7.5% and +4.2% in the 12 and 9 months leading up to Election Day, respectively, with 87% and 75% of total positive returns. each time.”
Author: Accutel
We are global investors who invest in quality companies at fair valuations and speculate on all other companies to the extent that they expose us to acceptable risk.
The #DisruptionBanking editorial team has taken every precaution to ensure that no person or organization is adversely affected or any financial advice is provided in this article. This article is definitely not financial advice.
