The March 1 primaries are history, and whether you think the Republican voting populace turned it into Stupid Tuesday or Soothsayer Tuesday, you might as well get used to the sound of this phrase, because it’s now a very distinct possibility. Ready?
President Donald J. Trump.
Increasingly it looks like 2016 will give America the most surreal election it’s ever seen: A former first lady married to an impeached ex-president squaring off against a billionaire reality TV show star. But if you’ve got money riding on this — and we’re not talking Las Vegas bets here — you’re likely less concerned with the outcome per se as what it’s going to do to your portfolio.
While Trump may be rich, he’s not going to send you lucre should the market head south. In other words: Don’t expect a big check, but rather a big reality check.
“From an economic and market point of view, a Trump presidency would be a disaster,” says Barry Randall, technology portfolio manager for Covestor and a registered investment adviser in Boston. “But it’s less of one if the Democrats retake the Senate and possibly the House.”
While the scenario might not make sense, “The stock market typically thrives with political deadlock,” Randall says. “But categorically, Wall Street hates uncertainty. Trump defines uncertainty because even he doesn’t seem to know what’s going to come out of his mouth.”
That view gets the vote of Gary Tobin, a former journalist and now the principal of Tobin & Associates in San Rafael, California. “The problem for Wall Street would be that he lacks any particular economic philosophy and is not predictable. He seemingly makes decisions and lays out proposals like a Roomba cleaning a floor: bouncing from one place to another.”
But for now, at least Trump played his Roomba card (or his trump card, if you prefer) mopping the floor in those Super Tuesday primaries. Surely the voters, having spoken, must know something market observers don’t, right?
Not necessarily, especially when it comes to who’s best for business. “We don’t believe that Trump represents something good for America,” says David L. Bahnsen, managing director and partner of HighTower and based in Newport Beach, California. “The question is, which candidate is most likely to deliver a pro-growth policy paradigm?”
And in terms of certain sectors, it doesn’t matter which Super Tuesday big winner, Trump or Hillary Clinton, lands in the White House. “With both candidates, we believe health care and biotech are vulnerable, as they’re making veiled and non-veiled threats to pursue price controls,” Bahnsen says. “With Trump, his economic nativism makes multinational companies who rely on lots of global trade vulnerable … and the Hillary Clinton of 2016 is running as anti-bank, anti-big pharma, and anti-free markets.”
Trump’s business background might make him appear the more preferable choice, but that’s a surface reading at best. “President George W. Bush was also promoted as a successful businessman on his way into office, thanks to his Harvard MBA and his ownership stake in the Texas Rangers baseball team,” Randall says. “But those business skills never seemed to play a role in America’s economic growth.”
“In my view, Wall Street would be very uncomfortable with a Trump victory,” says Paul Bennett, a clinical professor of finance and business economics at Fordham University’s Gabelli School of Business and former chief economist at the New York Stock Exchange.
Bennett sees two downsides to a Trump win. “First, Trump is very unpredictable and would cause problems for the U.S. throughout the world. Second, investors and traders in general would not view Trump as a Wall Street insider, or even a broadly sophisticated businessman, since his most visible business is so idiosyncratic and self-promotional.”
Yet it wouldn’t even take a Trump victory to make markets nervous: just a whiff would be enough. “Markets will be weakened as the probability of Trump victory rises,” Bennett says, noting that Clinton might actually be the preferable candidate on that score. “Hillary would be better for Wall Street because she is not an ideologue and is unlikely to take big steps to rein in Wall Street.”
Indeed, it might be better if Trump’s stump speeches steer from controversy and talk about maintaining the vitality of a stock market that can still see the wreckage of the Great Recession in the rearview mirror. Bennett believes that a Trump victory would have one very weak silver lining: “Export dependent industries might be relatively helped if the U.S. dollar tanks on a Trump victory.”
And as for investors’ concerns abroad, “Trump’s isolationist and protectionist rhetoric would not bode well for other countries’ economies or their capital markets if he were elected,” Randall says.
So in the meantime, you may want to hang on to your long-term investments like a roller-coaster bar — and for those get-rich-quick types, there’s no worse time for market timing than election time.
“The period from the convention through the election will tell us a lot more,” Bahnsen says. “Our opinion is that if this develops into a Hillary versus Trump race, the market will spend the second half of the year pricing in a Hillary victory. If we end up being wrong about that — in other words, if Trump really can beat Hillary — that will be the tale the Street has to price in.”
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Wall Street Is Terrified of President Trump originally appeared on usnews.com