Election 2020

Should Wall Street Be Worried by Potential Sanders, Warren Presidencies?

The Sanders-Warren agenda of higher taxes, increased regulation, and more government control worries Wall Street

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With Sen. Bernie Sanders (I–Vt.) currently leading Democratic presidential polls in Iowa and New Hampshire—and with caucuses and the primary in those states less than a month away—it's time to start paying attention to what a Sanders presidency would mean for the stock market.

Several prominent money managers have warned that a victory by Sanders or his ideological ally, Sen. Elizabeth Warren (D–Mass.), would bring a decline of between 25 percent and 40 percent in the value of U.S. stocks. That would destroy trillions of dollars in wealth of U.S. households. The resulting negative effect on everything from tax revenues to employment would affect even families without much saved in the stock market, and, ironically, could make Sanders' agenda of government expansion much harder to achieve.

"If Bernie Sanders becomes president, I think stock prices should be 30 percent to 40 percent lower than they are now," Stanley Druckenmiller told CNBC last year. Forbes says Druckenmiller has about $4.7 billion accumulated through a lifetime of managing money. It's worth paying attention to his warning.

"The biggest risk for 2020 is the presidential election," the New York Times quotes a JPMorgan researcher, Nikolaos Panigirtzoglou, as saying.

Another billionaire hedge fund manager, Paul Tudor Jones, said his firm's employees think the value of the large stocks in the Standard and Poor's 500 Index would decline by 25 percent if Senator Warren is elected. "Her policies would—assuming they were implemented—probably give you something like that," he said, according to CNBC. "As an investor, you have to have a view on the election because the outcomes are so extreme."

Another billionaire hedge fund manager, Marc Lasry, made a similar call, telling CNBC about Senator Warren, "I think if she's the president, market's down 20 percent, 30 percent."

At the end of 2018, U.S. households and nonprofit organizations held about $15.6 trillion in corporate equities, according to the Federal Reserve.  A decline of 40 percent would be a destruction of wealth of about $6.2 trillion. A decline of 20 percent would be a destruction of wealth of about $3.1 trillion. By comparison, the entire annual GDP of California in 2018 was about $3 trillion, and of Japan, about $5 trillion.

Doubtless some Warren and Sanders voters would see that sort of wealth destruction as good news. Since much of the stock market wealth is in the hands of rich people, a big stock market decline would reduce the inequality that so upsets left-wing Democrats. Sanders and Warren won't even have to wait for Congress to enact their "wealth tax"; they can make trillions of dollars disappear by means of intimidation, not legislation.

But the last time the stock market took that big a tumble was in 2008. If that's too long ago for you to remember, allow me to remind you: it was miserable. Businesses and state and local governments laid off workers, tax receipts tumbled, the real estate market tanked, unemployment rose. Instead of focusing on the problem that other people were too rich ("inequality"), people were worried about finding a job or about having their house foreclosed on.

In a roaring economy, it's easier to find money for spending on health care and education of the sort Sanders and Warren advocate. In a sagging economy, government spending goes up automatically on items such as food stamps and unemployment benefits, while income-tax revenues decline. In that environment, vast government expansion becomes less tenable. Obama managed it with the "stimulus" and ObamaCare during the post-2008 downturn, but he paid a significant political price, losing control of the House of Representatives. Likewise, President Roosevelt responded to a stock market crash with a vast expansion of government.

President Sanders, or Warren, would probably try a similar move, arguing that the same government programs they had proposed during the booming Trump economy are now more essential than ever as a way of cushioning the blow in a bad economy created by the expectation of their policies. The policy prescription—more big government—is the same. It's just the rationale that shifts, depending on whether the economy is soaring or sagging.

All of which is to say that there's probably some basis to the idea that a Sanders or Warren administration would be bad for the market. Democrats will write in to claim that stocks do better in Democratic administrations. And it's certainly possible that the market is driven over the long or even medium term mainly by forces other than presidents, who are constrained by Congress and who only stick around for four or eight years at a time.

But you don't have to be a Wall Street genius to understand that the Sanders-Warren agenda—higher taxes, increased regulation, more government control—means the share in future profits represented by a share of stock will be worth less.

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  1. Should Wall Street Be Worried by Potential Sanders, Warren Presidencies?

    Hell, yes. But not the short sellers.

    1. You beat me to it.

  2. Yes. I presume they will attempt to implement the policies what they have been saying what they are going to implement, which are objectives unjust and destructive.

    And to be sure, there is not enough money to reasonable extract from a roaring economy to pay for all the programs they have promised.

    1. MMT. No extraction required, just printing presses.

    2. there’s not enough money in the economy to pay for the programs we have now…. they will add some big new taxes, but even more spending.

    3. All important, but few are actually discussing her so-called “Accountability Capitalism Act” which effectively nationalizes every company worth a billion or more [not nearly as large as most people think]. Of course nobody likes the term “nationalize business”, because it sounds a lot like Venezuela, Cuba, China, and Nazi Germany, but that does not change the fact that it is just that.

      Requiring a national charter, government control over spending and management is effectively nationalizing business. And it’s the camel’s nose in the tent. Because if they can do that, they can change the fundamentals any time they want. Next up, why not half billion dollar companies, or even million dollar companies? Why not the corner company just down the street?

      If you want to stall American business, this is how you stall American business. Those who are well over that billion value are already stuck with it. But who the hell wants to IPO their company or make the move that brings them anywhere near this arbitrary threshold? If you’re on the board of directors of a $900 million company, are you going to vote for any growth that bumps you over a billion, knowing full well that will result in you losing control and very possibly, even your position on the board. Companies would be fighting like the 3rd monkey on the ramp of Noah’s ark to stop growth at all costs.

  3. No, Wall Street should not be worried.

    As I’ve been saying for months, when Democrats resort to “eat the rich” rhetoric, they don’t really mean it. These days Democrats are the party of the rich. Just look at their popularity among movie stars and tech moguls. Not to mention their embrace of open borders — a policy promoted by billionaires like Reason.com’s benefactor Charles Koch.

    #VoteDemocratToHelpBillionaires

    1. Speaking of Mr. Koch, his net worth increased by a pathetic $2.65 billion in 2019. I guarantee he will do much better in 2021 under any Democratic President, even Sanders.

    2. So what you’re saying is that all the Democrats are nothing but a bunch of liars who will say anything to grab power. Got it. Thanks for the clarification.

      BTW, eating the rich isn’t really a thing. Don’t believe for a second that Warren and Sanders would vote for anything that affects current holdings. They won’t be taxing their own estates and there won’t be any fewer rich people. No, this is why you have a handful of billionaires and the Democratic elite including your Hollywood DERPS who are okay with this. No, their past income current holdings are safe. Hypocrisy!

      No, it’s just those other guys and their ability to catch up, and sucking the lifeblood out of business that is at risk. That they WILL tax everything going forward, but what the hell does that actually matter to people like Bill Gates. He could pay 100% in tax for the rest of his life and it wouldn’t affect his lifestyle a bit. But it sure would slow down any potential threat from any business challenger. Amaright?

      As for open borders, they seriously don’t care, but not because of any belief in it as a policy. They’ve got their security and their compounds, and they go anywhere they want. But I don’t recall any of them threatening to move to Mexico either if Trump was elected, despite the weather. Hey, remember when Nancy Pelosi was standing with all those Hispanic kids and she said she just wished she could take them all home with her? Well, turns out she didn’t take any. In fact she wouldn’t even touch the little urchins. Hypocrites.

  4. Betteridge’s law strikes again.

  5. Should Wall Street Be Worried by Potential Sanders, Warren Presidencies?

    Should the wolf be worried when the sheep start pumping iron? Business worries more about stability and regularity and predictability than the specific conditions. They’re going to make their bank one way or another and, come down to it, a threatened loss of hundreds of billions or trillions of dollars creates a hell of an incentive to uh, “avoid” the threat, “eliminate” the threat if you will, if you know what I mean. A Sanders or a Warren presidency is not going to be a favorable business climate for people who are used to having a hand in shaping the business climate, but it’s not going to be an existential crisis. Not an existential crisis for them, at least.

    1. It is just the flu, not the plague. Nothing to worry about.

    2. A Sanders or a Warren presidency is not going to be a favorable business climate for people who are used to having a hand in shaping the business climate,

      For all their rhetoric, the people who’ve had a hand in shaping the business climate will still be doing so during a Sander/Warren presidency.

      In much the same way Trump couldn’t just come in and replace everyone in the civil service neither will these two make any real changes. And they really don’t want to. All their talk is to get them access to the levers of power – once they have them they’ll do what all their predecessors have done.

      Look at Obama’s ‘hope and change’ and all the shit he spouted while campaigning. Elected on a ‘I’m not Bush’ platform. Yet once in office what was he? Bush the Second.

    3. corporations are worried about socialists taking over in the US, because it is one of the few safe havens right now. but if it happens, they will just set up HQ somewhere else.

    4. In this case, Bernie and Warren are the wolves.

      Warren might be just mouthing this stuff, but Bernie is the real deal, a red diaper baby who honeymooned in the USSR. He would totally try to take the US full commie.

  6. If Bernie or Warren do anything really stupid. The Fed will just step in with another QE. Stock market is hardly a function of earnings and valuation anymore. Wall Street will be fine. Main Street will likely hurt from the policies and resulting inflation from the monetary policy that will need to accompany their policies.

    1. Either of those idiots would devastate this country.

      1. They ‘would’ if they got the chance; ‘could’ is closer and ‘never happen’ is best guess.

      2. They may devastate the country, but the stock market will be as fine as it always is.

        The market is overvalued and overdue for a correction anyway.

  7. I don’t care much whether Watt St should be worried. Everyone should be worried.

    1. what’s worrying is that so many people think their policies are a viable alternative, instead of a plague

  8. Wall, duh.

  9. the good ones make money regardless of what party is in power

  10. In some senses, yes. They will fuck up the Supreme Court, they will raise taxes, start wars all over, and regulate the economy until the USSR looks like a paradise.

    On the other hand, their dreams are too ludicrous to finance or implement. The Green New Deal and its ilk are too inconsistent to ever get past committee votes.

    1. On the other hand, their dreams are too ludicrous to finance or implement.

      Just because they won’t accomplish their stated goals doesn’t mean they won’t F up the economy trying. The Obama recovery was the slowest from a recession largely because every idiot in the country who wanted to punish business by forcing them to change agreements and give money away had a receptive ear in the White House. Either Sanders or Warren would be far worse because they’d dream them up themselves to save time – plus they know even more stupid activists.

      1. Obama was bad, but nothing like FDR and his brain trust. Warren or Sanders would make FDR look like an amateur.

        On the other hand, I think the sudden slide in the economy from them winning the election might just slow down Congress in doing what she wants. Obama could blame his slow recovery on Bush. Sanders or Warren would sure try to blame things on Trump, but the timing would point the finger right at them, and they’d spend all their time trying to emulate FDR, badly.

        1. Sanders or Warren would sure try to blame things on Trump, but the timing would point the finger right at them,

          They don’t care. They’ll put all the Dems on the education system payroll and blame the 1% for hoarding.

  11. When my gunsmith wants to test his work he goes to a derelict industrial park that was built during Obama’s stimulus. I went there with him once. Lots of money wasted on something nobody wanted or needed.

    1. My commute used to take me right by the Solyndra plant in Fremont CA. I watched the whole thing get built, thinking the whole time “what a fancy-looking building that is! I wonder what it’s going to be?”

      What seemed like days after the “Solyndra” sign went up, the “For Sale” banner went up. I never saw the building occupied until after it sold.

  12. It sort of goes without saying that when a socialist is running for office that private business should always be concerned since it’s only a hop, skip, and a jump away from a fully nationalized economy and top-down central planning.

    It does seem amusing that the left is busy with Russian fever dreams while trying to elect their own USSR-style candidate to the Presidency, though.

    1. Russia is not the USSR. One was holy, the other is a failed remnant.

      1. Well, never let it be said that there isn’t an American candidate for the Presidency that sold bread lines and government cheese as their platform…and that’s not a metaphor in this case.

        That said, it’s amazing that anyone could think that Grandpa Gulag is a solution to any problem, perceived or otherwise. He’s an avowed opponent of capitalism, so if you’re in business and you’re not afraid then the only logical reason why you wouldn’t be is because you plan on being inside the government rather than left out in the bread lines.

        I note that there are plenty of private businesses that seem to think they’ll be in power once the socialist revolution comes, so there’s plenty of useful idiocy to go around. Facebook and a few others are already perfecting populace control in foreign communist nations, so we know they’ll be ready when the time comes.

  13. I doubt they would get any of the big ticket stuff they want passed but all of the regulatory bodies will be in full swing and Trumps EO will be gone. I really wish the Repubs had tackled that in Trumps first year; ending the regulations by the executive branch. That should be the biggest issue they take up besides spending (which are connected).

  14. They shouldn’t be worried about either of them.

    Bernie’s a grifter and a slack-ass who hasn’t worked a single real job in his life, and would buckle under the pressures of being President. He’s a high-level jobber who’s tolerated primarily because he gets young people excited for MOAR FREE SHIT.

    Warren’s a hectoring, finger-wagging schoolmarm. She at least has a built-in constituency, but her personality is even worse than Hillary’s.

    Neither of them will be accepted as the nominee by the people running the Dems’ big-money funding machine. The party’s already been put on notice that these people will jump ship if Warren is nominated, while the Clinton faction in the party (and there are a LOT of them) hates Bernie’s guts for trying to get in the way of Her Majesty’s 2016 victory tour.

    2016 and the DNC email dump proved that this is a selection process, not an election process. That’s why Biden is currently leading in the polls, even though the poor bastard can’t even remember his last name half the time, and he’s threatening to wrestle people on the campaign trail that are criticizing him, and Bloomberg and Steyer think they can outright buy the nomination.

    1. You’re optimistic.

      Hope you’re right.

    2. Yes, you’re right! Only Wall Street, and corporate should get free stuff.

      1. ohlookWasteofcarbonmolecules with his NPC regurgitations.

      2. “Yes, you’re right! Only Wall Street, and corporate should get free stuff.”

        You’re tiresome, an adolescent slaver if you had a chance, and a fucking lefty ignoramus besides.
        Fuck off and die.

  15. Without reading I will say…yes.

    Wait. Allow me to amend.

    Fuck yes.

  16. Neither of them are going to implement anything.

    But I think this article inadvertently reveals that 25% of our market value is smoke and mirrors.

    I have seen companies gain and lose multiples of market value with no fundamental change in business.

    Do we blame the child for announcing the emperor has no clothes?

  17. When will you cucks and clingers understand that socialism and your betters will change your life forever. Free dicks for everyone.

    1. Big black ones?

      Tony will rejoice!

    2. Free dicks? And if we have one now, could we hope for the long desired double wicking my Mom talked about when we were a kid?

  18. Lesson 1 learned working on Wall Street:

    The investment banker always wins.

    They’re not too worried.

  19. . . . Should Wall Street Be Worried by Sanders or Warren Presidencies? . . .

    Not only Wall Street should be worried but so should the regular middle class tax payer. If they get enacted anywhere near their programs the taxes on everybody are going to skyrocket. As the taxes skyrocket the economy will fall like a rock. Then they will have to institute a government program to stimulate the economy (more taxes) and deficits will out pace the rate of climb that it has had since 2008 and national debt will climb. Next thing that we will know there will be a depression which will kick national debt rate of climbing into overdrive.

  20. The New Tea Party will make the 2009 version seem like, well, a tea party.

  21. Should they be worried?

    Not really. The rich are extremely mobile internationally. The last time the government went after Wall Street . . . well, The City became the defacto world finance center.

    1. “Not really. The rich are extremely mobile internationally.”

      Carlos, is that you?

  22. I would suggest that the legacy media should be far more concerned that Trump is gonna get a second term, since none of the D candidates are running under any winning claims.
    We got the hard left promising free shit forever, and while that’s appealing, it’s probably not a winning pitch to those who are really doing well with Trump sitting there.
    And then we got Steyer and (uh, oh yeah,) Bloomberg (sort of a forgettable POS) both running on platforms of ‘I’m a billionaire and I can beat Trump!’. OK, and then what? Beat the guy who’s delivered the strongest economy in years? The guy who has turned my 401K into an 801K? Gonna beat a 3.5% U/E rate by ‘beating Trump’?
    You scumbags may hate Trump, but the world is not interested in your personal hatreds; your narcissism isn’t gonna cut it. We don’t care who you hate; it’s about the money in our pockets, and neither of you has offered anything.

  23. No, because they’re going to get destroyed in November. The commies may be a loud minority in the U.S., but they’re still the minority. The people who don’t want to give 70% of their earnings in taxes will hear Bernie’s plan and dump him faster than that hippie commune dumped him for being a lazy sack of shit.

  24. so many people think that their policies are a viable alternative

  25. Warren is an establishment hack; she talks socialist, she’s an authoritarian, but in the end, if there is one thing she isn’t going to do it’s to hurt her rich friends.

    Sanders is too senile and infirm to get anything passed. If he was elected, he’d probably keel over from a heart attack before even assuming office.

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  27. Wall street will be fine, but the mix of stocks going up may change.

  28. “”Doubtless some Warren and Sanders voters would see that sort of wealth destruction as good news. “”

    Except they point to the stock market when it drops as a sign Trump is bad.

  29. “And it’s certainly possible that the market is driven over the long or even medium term mainly by forces other than presidents, who are constrained by Congress ….”

    WAIT … Presidents are constrained by Congress? That’s adorable.

    And you’re ignoring the obvious fact that at least a third of the fairy tale that is market valuation is based on the mood of a gaggle of sociopath managers and analyst puppeteers, and thus, yes rests on the thing that all of them fawn over – the POTUS.

  30. The impact of the stock market on most American’s standard of living is over estimated

    https://www.marketwatch.com/story/americas-super-wealthy-own-more-stocks-leaving-average-people-in-the-dust-2019-01-28

  31. Nobody should be worried (or even remotely concerned) by Sanders, Warren presidencies, because there is no chance in hell it could ever possibly happen. None!

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