The 2020 presidential election is still about a year and half away, yet a large number of investors have already made changes to their portfolios based on potential outcomes. Some 40% of investors say they have adjusted their portfolios because of the upcoming election, according to a recent survey. The reality is that investors are worried about a Democratic sweep of the presidency, House, and Senate, which could mean a serious rollback of Trump-era policies, including tax cuts. “If Biden continues to poll this well into the beginning of next year ahead of the primaries, he is gonna start to have some negative effect on the market”, says Tony Roth of Wilmington Trust.
FINSUM: We can’t help but agree with that last assessment. That said, we think negative effects will be slow and steady, not sharp moves.
New polling data has come out since Joe Biden, former vice president, announced his candidacy. In a development that may come as a surprise, poll numbers are showing him as the Democratic front runner, unseating Bernie Sanders. 39% of Democrats or Democrat-leaning voters say he is their top choice for the candidacy. That figure is up from 28% in March.
FINSUM: It looks like Biden’s reputation hasn’t been tarnished much by the negative press lately. That said, we still favor Bernie to get the nomination on the Democratic side.
Senator Elizabeth Warren, who is running for the Democratic presidential bid, has just put forward a brazen new policy. She is calling for a large scale program to forgive student debt for millions of Americans. She wants to offer a $50,000 forgiveness program to those with incomes under $100,000. She plans to finance the overall program, which also includes making future tuition free, through a tax on the ultra wealthy. Her plan has faced some internal party criticism, because many times those with the highest debt are also those that went to elite colleges and tend to be at the higher echelons of the earnings spectrum.
FINSUM: While this is a LONG way from happening, it is worth thinking through, especially as other candidates are likely to adopt some form of it. In our view, the biggest beneficiary of this policy would be real estate, as it would enable a whole generation of Millennials and Gen Zers to buy homes because they would suddenly be unsaddled by student debt.
The field for the Democratic nomination for the 2020 presidency could hardly be more crowded. 18 candidates have already declared, and a handful more, including heavyweights like Joe Biden, are expected to announce their candidacy. The big question right now is “who is leading?”. It is hard to answer perfectly, but two proxies—google activity by region, and fundraising, tell an interesting story. So far, it is Bernie Sanders as a clear leader, as he has garnered the most search and media interest and also leads in both self-funding and external fundraising by a wide margin. Kamala Harris has also garnered significant interest and and stands third in total funding. Sanders also leads in another interesting area—the share of small donations as a portion of total donations, a demonstration of a candidate’s total following.
FINSUM: Elizabeth Warren is also in the mix, but just from the early data we still think Bernie is going to be the candidate who faces Trump.
In what seems slightly odd timing, Goldman Sachs is going on the record about the 2020 election. The bank is saying Donald Trump is likely to win re-election. Goldman says his lead is “narrow” but that his chances are improved by the crowded Democratic field and the success of the economy. What is so interesting about the call is that in runs in contrast to most polls, which Goldman points out, saying “While we believe the majority of market participants expect President Trump to win a second term, we note that prediction markets point in the opposite direction and imply that the Democratic candidate has a 56% probability of winning and the Republican candidate has a 44% chance”.
FINSUM: We have to agree with Goldman. Trump’s base seems to have grown in strength since his initial election, and the politics of the left seem more likely to fragment their base (including into third party candidates) that unite them behind a single leader.