DJIA : Ignoring Threat From Joe Biden
(Mon, 24 Aug 2020). Stocks are supposed to be forward-looking. So why aren`t they pricing in the dangers of a Biden Presidency and control of the Senate? Investors seem complacent to the threat of a Joe Biden presidency.
Stocks continue to tread higher as Biden leads in the polls. A new narrative is forming that Biden will focus on the economy, not far-left, job-killing proposals. Markets continue to ignore the fact that Biden would not be the driving force in his administration. Retail traders continue to push stocks higher, even in light of the recent rise in unemployment claims. That’s leading some investors watching the poll numbers to give the “all clear” on a Biden administration.
Joe Biden: Shark Tank Approved?
The most significant “endorsement” for Biden not blowing up the stock market comes from foreign national Kevin O’Leary. The Canadian businessman and Shark Tank star. That’s in reference to the Green New Deal. This potentially $93 trillion boondoggle would lead to a surge in government interference in the private sector, all in the name of the environment. But it wouldn’t fix many of the problems it purports to solve either. That said, with Democratic control of the House after 2020 looking likely, and a potential flip of the Senate this year still in the cards, there’d be nothing to stop the passage of any such bill, should a President Biden decide (or remember) to sign it.
Watch for Moderation to Go Out the Window on Day One
The real question in a Biden presidency would be who runs things. Voters have made it clear that there are some reservations over Biden’s mental capacity, at least among Republicans. But a majority of voters also see a high chance of Biden failing to serve a full term as president. That’s made the controversial choice of Kamala Harris a wild card. So far, it’s only mildly impacted Biden’s lead in national polls. Should the campaign start adding a few more left-wing names to crucial positions such as Secretary of State or Secretary of the Treasury, all bets are off. Biden is also being packaged as a moderate—but that’s only in moderation to his party, as seen from his tax plans during the primary alone.
If it looks like Biden will pull off the election, the stock market will start to price in the potential dangers of both a “Biden” presidency as well as Democratic Party control of both houses. The last time markets, which are forward-looking, faced that kind of scenario? 2008.
How did markets perform then? Not well. Stocks continued falling until March 2009 when it became clear President Obama wouldn’t punish the financial sector as much as expected. Investors may not be so lucky this time around. The stock market likely won’t start pricing in a Biden presidency until a month or so before the election, but it would pay for investors to start eying potential safe-haven investments now.
GFS ASIA TEAM
- just now