The intersection of politics and business is rarely good for anyone. Too much money corrupts governing and too much governing can get awfully expensive – as can haphazard, capricious, and ego-driven governing.
Which is why the question has to be raised now that a certain person appears to be cruising to the Republican nomination – and his name ain’t Cruz. We have a policy at Barataria of never mentioning his name, something like Voldemort, as he gets enough oxygen for being obnoxious (noxygen?) already.
But is his rise part of the reason why markets have been somewhat panicked? It’s hard to tell, but there is reason to believe that markets in general, as well as faith in the US of A from abroad, are starting to react badly to the rising prospects of the greatest nation ever being run as the largest and most powerful ever set for a reality show.
It’s been a bad year for stocks and a bad year for the establishment. It’s natural to assume the two might be related as the great Powers that Be quiver in fear of the barbarians at the gate. Or, perhaps, you may prefer the less romantic vision of a bunch of boorish idiots in charge of the highly complicated machine that is a modern economy.
The rise of the Republican front-runner is probably more of a worry than the bank-busting healthcare-providing platform of Sen Sanders. While Clinton has had a reasonable scare the betting money is still on her to win the Democratic nomination and eventually the Presidency with about a 52% chance.
The Republican race? No one has believed what’s been happening so far. On Feb 11th this piece asked, “When will financial markets panic?” Two weeks and a few blistering wins later, including 46% in the Nevada caucus, it’s more of a question of how the panic will set in. That certain person has gone from about a 20% chance to 37%.
Sanders, who should scare them more, is given only an 8% chance by the betting money.
It’s not as though his support is really that deep, after all. Running a consistent 30-something percent of a party that makes up a third of the electorate gives the frontrunner a 10-12% base, hardly a majority. The big win in Nevada was much scarier, but 35k votes is still just a bit over 1% of the population of the Silver State.
For all this noise, a successful businessman would be good for stocks in general, yes? Not one who is running on a “Screw China” platform or looks likely to cause friction with our less blusterful allies (ie, all of them). Populist risings of any kind are a good reason for establishment money to be afraid – even if not always for the right reasons.
Howard Marks of OakTree Capital said on Bloomberg that he is “Scaring the Hell out of people,”, but Nick Colas of Convergex said on the same show that the odds still favor Clinton and there’s no reason to go nuts.
Over on CNBC, Managing Director and Chairman at Standard & Poor’s Investment Advisory Services Mike Thompson said “I think markets are in a kind of a state of disbelief. I don’t think they’ve ever seen anything like this. The extreme between the two parties is really striking,” On top of worries about global stability and the potential for default in the oil patch this is not what the market needs.
Whether or not there is a panic on Wall Street now, most agree that more wins by the frontrunner will gradually become a problem. More and more calls are rising for the Republican Party to do something, anything, to derail this prospect. It seems that most investors are perfectly fine with the idea of Clinton as president.
Go ahead and be smug, Sanders fans. Go ahead, you win this one.
It is certainly worth keeping an eye out for worry about the next president to influence stock markets, but it does not seem like a critical factor – yet. A lot depends on the reaction after Super Tuesday when the juggernaut may trigger a general upheaval in the party.
The rough ride is far from over.