October 7, 2019
Stocks Already Face Pain of Elizabeth Warren Win, Analysts Say
by Felice Maranz
Bloomberg.com
(Bloomberg) -- Though there’s more than a year to go before the November 2020 presidential election, the stock market has started to reflect the ramifications of Elizabeth Warren potentially capturing the White House, analysts say. They’re flagging the senator’s rising influence ahead of bank earnings reports, which kick off next week, and as the possibility of impeaching President Trump has pulled forward some risk.
Bank earnings season starts on Tuesday, Oct. 15, with reports from Citigroup, JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co.
Here’s a sample of the latest commentary:
Cowen, Jaret Seiberg
“Elizabeth Warren will be the overhang this earnings season,” Seiberg wrote in a note. Even if she fails to secure the nomination, she “will control financial policy in any Democratic administration,” which is “negative for big banks, private equity, payday lenders, debt collectors and servicers.”
Just how much the senator’s policies will hurt the financial services sector depends not only on whether a Democrat wins the White House, but also on which party controls the Senate, he said. “If the GOP keeps the Senate -- which is likely -- then there will be sharp limits on what she can achieve.”
RBC, Lori Calvasina
The possibility of a Trump impeachment has pulled some risk into the current quarter, Calvasina wrote in a note. She sees further potential headwinds for the stock market in the first half of next year, particularly the first quarter, as about two-thirds of Democratic party delegates will be assigned by early March.
A Warren win, along with Democrats taking complete control of Congress, would be “extremely challenging for stocks,” Calvasina said, with the “sheer multitude” of Warren policy plans leaving “U.S. equity investors with few safe havens.”
Investors polled by RBC have highlighted health care as the primary sector at risk in a Democratic sweep. But the firm’s own analysis -- including a survey of RBC industry analysts in early October, plus a review of which sectors have gained the most from lower corporate taxes and share buybacks -- indicated there’s also “extremely high risk” for energy and financials, and a “significant degree” of risk for industrial firms and tech. Implications for consumer discretionary, communication services, materials and consumer staples are mixed, while utilities and REITs face the fewest risks.
In the long run, however, “any pain from a Warren win is likely to be temporary,” Calvasina said. “Most of the sectors at high risk under a Warren presidency from a policy perspective (Financials, Energy, Health Care, Industrials) are already deeply undervalued versus the broader market.”
Height Capital Markets, Benjamin Salisbury
“The fall brought football and a flood of client questions about what Senator Elizabeth Warren would be like as president,” Salisbury wrote.
Now comes “a crucial period for winnowing the field of contenders with two debates and a fundraising report,” he said. Height is emphasizing the “importance for investors of monitoring which candidates survive the winnowing into the Second Tier as historically, half the Democratic nominees have come from fourth place or worse at this stage in the campaign.”
http://finance.yahoo.com/news/stocks-already-face-pain-elizabeth-124910446.html
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