Regulation

Presidential Contest May Bring Markets To Razor’s Edge

So … who woulda thunk it?

Nonetheless … It’s been thunk.

Donald Trump. Hillary Clinton. November. What will it mean for the markets? And beyond?

The answers are varied and are predicated on the thought that the candidates will move to get done what they said they will get done or try in earnest — in other words, that campaign promises will indeed be translated to action. That’s a stretch, but the premise does deserve some consideration. Clearly, the candidates have a sense of how to proceed, else they wouldn’t want the job.

It is true that presidents may not have all that much control or influence on the economy and on subsets of the economy (such as, say, banking) that may be perceived. After all, there are a few other participants in policymaking, from the Senate to the House of Representatives to state and local governments. But the bully pulpit can be a stage for grand ideas, or even petty ones, signaling change and thus reactions on both Main Street and Wall Street.

First: Trump. The theories abound that he has been saying what he’s said without really believing his own (at times, outlandish) policy proposals — that what he said on the stump was designed for primary season votes. But, let’s say — as he said quite recently — that the wall would begin within the first 100 days, that immigration would become a key focus for his administration and that 11 million souls would suddenly be persona non grata here. That’s a lot of wage-earning (and, for payments firms, remittance-sending) people suddenly gone.

As for Clinton, the finance industry — particularly in banking — may be a bit more sanguine on a tenure with her in the Oval Office. After all, she has not — in contrast to some peers on the left side of the aisle — called for a breakup of the big banks. There would likely be some boosts in taxes for high-frequency traders, a relatively small subset of Wall Street players. Dodd-Frank would remain in place, which essentially means the regulatory framework around big finance would be pretty much as it has been. Trump has dismissed Dodd-Frank as a disaster, closing off the spigot to more job creation here in the U.S.

Trump might not be able to change much about the regulatory fencing around Wall Street (Congress again), while Clinton has signaled nothing drastic would come down the pike in that regard, cementing a mindset among banks and investment firms that life would be at least stable with her as president. In the meantime, Trump’s threats to dive into trade wars and push up tariffs so high that the view of America’s position in global trade becomes dismal could have aftershocks far and wide. Wall Street hates uncertainty, and such economic saber-rattling would kick uncertainty up several notches (and trade wars, it should be pointed out, never do much good for consumers, the lifeblood of the economy).

Apart from Wall Street (and the finance firms that call The Street home), Main Street businesspeople may find more cheer with Trump, given his 15 percent promised tax rate that would be extended to smaller firms (usually taxed at individual income tax rate levels). That could conceivably push store front creation up a bit and even translate into wage growth.

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