Who is Better for Wall Street – Clinton or Trump?

Wall Street investors are faced with a dilemma.  Which of the leading presidential candidates would be better for the stock market … Hillary Clinton or Donald Trump?  Both have their supporters and detractors among the Wall Street elite and neither is likely to get the full support of the business community.  What are the factors analysts are considering as we approach the 2016 presidential election?

Trump-Clinton-photo - who is better for Wall Street - Clinton or Trump

Investors are asking themselves who would be better for Wall Street – Clinton or Trump. What effect would their presidencies potentially have on the U.S. economy in coming years? (https://twitter.com/THR/status/725172662729883648)

Although Wall Street has traditionally leaned Republican, there appears to be some cracks in that support during this election cycle.

Charles Koch, one of the Koch Brothers who have been major financial supporters of the Republican Party in recent years, made headlines during a recent televised interviewed when he said that it was possible that Hillary Clinton would be a better president than any of the current candidates … based primarily on the effect he believes she could have on the economy if she is elected president.  See an excerpt of the interview below:

During the 2016 New York Republican primary, Manhattan was the only area of the state that  voted for Kasich over Trump, giving us our first hint that the Wall Street elite may have some reservations about the impact of a Trump presidency on the stock market.

What are some of the potential effects of either a Clinton or Trump election on the stock market?

Potential Effect of a Hillary Clinton Presidency on the Stock Market

Some analysts believe that her attitude towards Wall Street may be more moderate than that of Mr. Trump.  After all, she was the U.S. Senator for New York for eight years and got along well with the big banks and Wall Street investment houses.  Some people have, in fact, criticized her for getting along too well with Wall Street.

Clinton has already had to defend her close relationship to some of the big Wall Street firms.  They have supported her campaign by paying her large sums of money to give speeches.  All this sounds like Wall Street would generally be pleased to have her elected president.

However, she has also made a few statements that concern wealthy investors.

Among the proposals she had made would be to tighten banking regulations (beyond the 2010 Dodd-Frank rules), impose additional fees on the banks, increase capital gains taxes, and add a new surtax on millionaires.

However, there is a reason that they proposals do not appear to worry wealthy Wall Street tycoons too much. All of those changes would require Congressional approval and there almost certainly would have to be compromises made before she could enact any of that legislation, especially if either the House or the Senate remains in Republican hands.

Potential Effect of a Donald Trump Presidency on the Stock Market

Donald Trump has been very negative about hedge fund managers, saying that they “are getting away with murder.”   Ironically, since he himself is a billionaire, he is also critical of the tax breaks that benefit the wealthy.  He says on his website that he would like to lower the corporate tax rate, but eliminate tax loopholes that benefit the wealthy.  Obviously, hedge fund managers and other high-net worth individuals are concerned about what changes he would make and how they would be affected.

Trump has also been critical of tax inversions, which allow companies to move their headquarters overseas and avoid paying U.S. taxes.  Recently, however, the Obama administration acted to make tax inversions much more difficult, so on this issue Trump appears to be aligned with the Democrats.

Trump has also been very vocal about wanting to renegotiate trade deals and put tariffs on many Chinese imports.  These are two issues that concern Wall Street and the executives of many large corporations, since they don’t know how they will be impacted … which makes it hard for them to make long-term business plans.

Mr. Trump’s plans, like Secretary Clinton’s, would also require Congressional approval.  However, if he wins the presidency, it is likely that the House and the Senate would remain in Republican hands, making it much easier for him to get his agenda passed.  This could potentially mean there would be major changes in our trade deals and relationships with our foreign partners, as well as changes to the tax laws.

Who Would Be Better for Wall Street … Clinton or Trump?

It appears that both Clinton and Trump would make changes that would increase taxes for the wealthiest Americans.  However, Clinton’s approach would be more moderate.  She is not proposing major changes to our trade agreements; nor is she proposing higher tariffs, which could start a trade war.  She also would be forced to keep her proposals more modest, since it will be tougher for her to get them through Congress. While there are exceptions, Wall Street seems to be leaning towards Clinton.

On the other hand, if Clinton manages to flip both the Senate and the House of Representatives to the Democrats, she could receive pressure from the left to make more dramatic changes than the ones she has already proposed, including higher taxes and even tighter banking restrictions … which might not be very friendly towards big investors.

So the dilemma remains.  Wall Street seems to prefer a divided government … a Clinton presidency with a Republican Congress.  In other words, what ever changes are made by the next president, Wall Street would like to keep them small.  They don’t want either candidate to be elected and then have unfettered freedom to do whatever they want. The big banks and Wall Street firms are pouring money into super PACs in the hope of getting what they want.  After the election is over, no matter how it turns out, they will likely continue to lobby for their agenda.

In other words, when Wall Street can’t get its own agenda promoted, it prefers gridlock.

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