Many economists, particularly in the banking industry, make it a policy to not comment on what’s become a heated presidential election race. After all, what’s the advantage of possibly losing clients by offending them with divisive commentary in a highly competitive banking environment?
But Greg Valliere, chief political strategist for Horizon Investments, which advises institutional investors, recently told the CFA Society of Detroit that while Democratic candidate Hillary Clinton is still expected to win, it would be unwise to underestimate GOP candidate Donald Trump.
Right now, the financial markets seem to be betting on a Clinton win, but not a landslide. But he cautioned that a Trump presidency is not priced into stocks now, much as Wall Street underestimated the chance that voters in the United Kingdom would favor exiting the European Union.
“They got it wrong on Brexit,” Valliere said.
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For Trump supporters, he said, Clinton represents more of the same mediocre economic growth – and Clinton’s agenda does not seem to focus enough on growth.
Valliere said the impact on investors of a Trump presidency would likely be one of more uncertainty.
“I would argue on many issues that Trump would be the mother of all uncertainty,” Valliere said.
Two issues that could hurt stocks: Trump has virtually promised a trade war with China. And Trump lately has expressed growing criticism of Federal Reserve Chair Janet Yellen – indicating the prospect of a “spitting match” between Trump and Yellen if he wins the election, Valliere said.
On the positive side, though, he said Trump likely would make progress when it comes to necessary tax reforms.
As for Clinton, Valliere said drug stocks would likely be vulnerable as she’d be tougher on drug pricing. Yet health care providers and renewable energy would do well. But he noted that the chances of a tax hike would likely be slim, especially if Clinton does not win by a landslide. He would expect Clinton to continue adding regulations via executive orders.
Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at firstname.lastname@example.org.