viernes, 19 de febrero de 2016

viernes, febrero 19, 2016

Barron's Cover

Trump and Sanders: Are They Killing the Stock Market?

U.S. stocks have fallen sharply since Trump and Sanders began rising in popularity in the polls. It could be more than coincidence.

By John Kimelman         
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  Democratic presidential contender Bernie Sanders, left, and the GOP’s Donald Trump have worried both political parties. They might also be rattling Wall Street, based on the stock market’s recent rout. From left: Andrew Harrer/Bloomberg, Daniel Acker/Bloomberg
           
 
The rise of outsider presidential candidates Donald Trump and Bernie Sanders is more than a fascinating political story. Their ascendancy—Trump’s in the Republican Party, and Sanders’ among Democrats—could be one more reason why stock markets are under pressure and could remain so for awhile.

Many market pundits are too focused on the latest Chinese economic data, oil-price movements, or negative-interest-rate chatter to connect the dots between the presidential-primary results and the stock indexes. By taking such a traditional view of market-moving developments, they might be overlooking a story that is leading news reports every day and night.

Investors have every right to be nervous about what is playing out on the campaign trail.

The thinking goes that those who buy and sell stocks are comfortable with establishment candidates such as former Secretary of State Hillary Clinton and former Florida Gov. Jeb Bush, because both are fairly predictable and won’t upset Washington’s apple cart.

If Donald Trump, a real-estate developer and television star, gets elected, however, and brings his reality show to 1600 Pennsylvania Avenue, the Free World could have a shoot-from-the-hip leader who carries through on threats to punish China and other trading partners with tariffs to level the playing field. Many economists view such protectionist measures as a cause of the Great Depression, and Barron’s, too, thinks they would be harmful (see “Trump Is Wrong on China,” Nov. 16, 2015).

And that’s when he isn’t trying to deport millions of undocumented immigrants—a view that most Republicans view as highly impractical and likely to cause tremendous civil strife.

If the more earnest Sen. Sanders of Vermont, who bested Clinton by a wide margin in last Tuesday’s New Hampshire primary, were to win the White House, the U.S. would have a professed democratic socialist at the helm, with a long list of ambitious but expensive goals, such as single-payer national health care, free tuition at public colleges, and a major federal bridge- and highway-construction effort.

The Wall Street Journal has written that his proposals, if enacted, would “amount to the largest peacetime expansion of government in modern American history.”

The Standard & Poor’s 500 stock index has declined as Trump and Sanders have gained in popularity, based on polling data compiled by RealClearPolitics, which averages the results of multiple national polls. That’s not to say concerns about a weakening global economy haven’t exerted greater pressure on stocks, but the link between the candidates’ performance and the market’s might be more than coincidental. Nor are investors given “exit” interviews after placing a trade to probe the factors informing their decision-making.

TEXAS SEN. TED CRUZ, who won the Republican caucus in Iowa and is currently viewed as Trump’s most serious challenger for the Republican nomination, is considered by the establishment wing of both major political parties to be too extreme in his conservative views. A proud member of the Tea Party, he has called for the abolition of the U.S. Departments of Energy; Housing and Urban Development; Commerce; and Education, as well as the Internal Revenue Service. He has also spoken warmly about a return to the gold standard, an idea that almost all economists are against.
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The rise of these unorthodox candidates is troubling to both Wall Street and Washington, wrote Greg Valliere, chief strategist with Horizon Investments, in a memo to his institutional-investor clients the morning after the New Hampshire primary. “Financial markets—which have more than enough to worry about—now have to deal with the likelihood of political instability for months to come,” he stated.

Jim Paulsen, the chief investment strategist with Wells Capital, maintains that traditional market-based concerns will always have a bigger role than presidential politics in moving stocks. But he concedes the market might have reservations right now, with so many antiestablishment candidates performing so well.

“There is a realization among global investors that all big decisions are global, and there is some apprehension about an oddball candidate as president on the global stage,” he says. “Our bargaining power as a nation could be diminished.”

Ed Yardeni, president of Yardeni Research and a longtime market commentator, adds that when investors are in a bearish mood, “they keep adding to their worry list. The possibility of a maverick becoming the next president has to be unsettling for investors.”

Yardeni says it is “conceivable that we have a president with no experience in negotiating the political shoals of Washington, or of foreign policy.”

Yet, despite a likely negative effect on stocks in the short term, a nonestablishment figure in the West Wing might not be such a bad thing in the long run, he says. As much as investors might fret about a newcomer, they have long been comfortable with political gridlock, which occurs whenever Congress refuses to go along with what a president proposes.

“Having a maverick in the White House would ensure gridlock,” Yardeni writes. “And look how well the stock markets have performed in recent years, despite the gridlock between the Obama White House and Congress.”

Paulsen concurs, saying that “even if you have any of these true outliers in the White House, it doesn’t mean they might get any more done than we are getting done under Obama.”

THESE MARKET VETERANS have a good point. What are the odds that a President Trump could win congressional approval to impose tariffs against errant foreign trade partners? Or that Sanders could get Congress to create a new Great Society?

But is the “gridlock-is-good” argument enough to reassure investors, if it appears that the next president is named Trump, Cruz, or Sanders, as opposed to Clinton, Kasich, Bush, or even Rubio?

Right now, any establishment-loving investor who places faith in the collective wisdom of online gamblers might be taking heart from the fact that Hillary Clinton, a fan of both political moderation and Wall Street dollars, is an even-money bet to take the presidency in November, according to Ladbrokes, the British betting parlor.

Trump is the runner-up, according to the current betting, with 9/2 odds. 


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