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At first glance, Clinton appears less favorable to both business and Wall Street. But it's the opposite.
Clinton always chooses her words carefully when talking about financial firms and reforms. She gives herself a way out. "I would be willing to do X – if necessary." Wall Street trusts Clinton will keep its best interest in mind no matter what she tells the public.
The Wall Street Journal reported this summer that roughly 14% of the total money donated to Clinton had come from hedge funds. Trump's support from such groups at that time was almost non-existent. In recently leaked emails, Clinton said that people need to have both public and private positions. She proved that by saying in an October 2, 2008 interview on WNYC radio, "I think the banks of New York and our other financial institutions are probably the biggest winners in this [the Wall Street bailout during the financial crisis], which is one of the reasons why in the end, despite my serious questions about it, I supported it."
My summary of the Clinton philosophy is "coddle the masses while cuddling the powerful." That is acceptable to Wall Street and business. The single most important reason the former New York senator is good for business? It's not because her policies are good for business. It's because she's predictable. I can take a punch—but I can take it a lot better if know where it will land and when it is coming. A Clinton presidency is a punch that corporations and markets have been expecting for months.
Markets won't celebrate her victory, but they will sigh in relief.
For any business, knowing what to expect is priority number one. Corporate control freaks feel good when they feel in control. When you know what to expect, you can plan. You can invest, spend, hire and grow. Businesses feel in control when they believe they know what to expect. They know what she'll say to the masses, but they also know what she'll do in the end. Coddle then cuddle—she can play that song in her sleep.
Trump's reputation is that he is rash and unpredictable on all fronts. Middle America hates Wall Street and Wall Street somewhat ironically hates this billionaire. How do you plan for an environment influenced by a man who seems to create policies mid-sentence and has ostracized himself from his own proverbial country club? You don't. You don't invest, spend, and hire.
The next president will preside over war. Obama ran as a “Carebear” and yet even he has presided over eight years of fighting. What should we expect from a volatile Trump or the supposedly war-hawk Clinton? The key point is that fighting is predictable. More war is coming. But the method of engagement is where things get dicey. Businesses have navigated Clinton being a member of the Senate Armed Services Committee and Secretary of State. They've already seen her influence on Obama. Conversely, Trump threatens unprecedented shocks, and even raises the specter of a nuclear war.
War means market volatility, predictably irrational sentiment disruptions that are completely divorced from the quality of corporate earnings. Earnings matter most to stock prices. They matter more in the long run. In the short run, stock prices are nothing more than votes of sentiment.
A Trump win would be a surprise that would cause erratic market behavior. Investment managers who know how to profit from volatility will beam with joy for a bit. Then the course will resume. What happens from 2017 to 2020 has less to do with the new president, and a lot more to do with prior administrations. The post-2008 meltdown was a prime example of that. Was there ever a luckier time for a president to enter office than right when a massive bounce-back from being oversold was due? Presidents are like quarterbacks: They get too much credit for wins and too much blame for losses.
In the end, a candidate is not an investment strategy. A person is far better off with a strategy that embraces the situation as it is rather than being scared into hiding by uncertainty. And if you don't know how to embrace it, get some advice from someone who can show you how.
Joshua I. Wilson CMT is a partner and wealth manager with WorthPoint Investment Management, a California-based fee-only Registered Investment Advisor. He has also managed over $2 billion for TD Ameritrade. Joshua led the national training and development program for all of TDA’s new advisors and managers, won a national coaching award.
Read more articles by Joshua I. Wilson
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
