“Add the juggernaut that is Donald J. Trump to the list of what-ifs that is worrying Wall Street,” Gertrude Chavez-Dreyfuss and David Randall report for Reuters. “A growing realization that the unpredictable New York real estate developer is in a position to win the Republican nomination and then battle Hillary Clinton for the White House in November’s election has caused some investors to sell U.S. stocks. They fear having such a wild-card president could trigger trade wars, hurt the economy and add a lot of market volatility.”
“Trump’s statements on business and Wall Street don’t neatly fit into one ideological worldview, but if anything, they are seen as isolationist in a globally connected world. He can also suddenly pick on businesses over various issues, such as his call for a boycott of Apple Inc’s products after the tech giant refused to help the FBI unlock the iPhone used by one of the San Bernardino shooters,” Chavez-Dreyfuss and Randall report. “‘The election this year is the height of uncertainty,’ said Phil Orlando, a senior portfolio manager and chief equity strategist at Federated Investors in New York, which manages $351 billion. He said political concerns – personified by Trump’s emergence as a frontrunner – are one of the main reasons why he began reducing equity exposure in mid-January.”
“Trump’s rhetoric mixes populist criticism of immigration policy, Wall Street behavior, and other countries’ trade policies, while also citing support for business-friendly efforts such as lower taxation. The lack of detail from Trump about his policies and how he would implement them is a particular worry for investors,” Chavez-Dreyfuss and Randall report. “The real estate investor proposes labeling China a currency manipulator and ending what he calls China’s illegal export subsidies and theft of U.S. intellectual property. He also wants to penalize companies who move jobs from the U.S. to Mexico by hitting them with high tariffs if they want to export back to the U.S., as well as build a wall at the Mexican border to prevent the flow of illegal immigrants.”
“Trump’s plans include ideas that traditionally come from Republican candidates, such as lowering the corporate tax rate, simplifying the tax code, and as his web site puts it, cutting the deficit through ‘eliminating waste, fraud and abuse’ and ‘growing the economy to increase tax revenues,'” Chavez-Dreyfuss and Randall report. “‘I think markets will like Trump on the taxes issue since he favors lower rates and a permanent change in repatriation rules,’ said David Kotok, chairman and chief investment officer at Cumberland Advisors in Sarasota, Florida, which manages $2 billion in assets.”
“Still, financial advisers say that Trump’s plans to do away with the so-called carried interest tax loophole – which gives hedge fund and private equity managers preferential tax treatment on much of their income – would prompt more selling if he begins to climb in national polls against Clinton,” Chavez-Dreyfuss and Randall report. “Jeffrey Gundlach, the co-founder and CEO of bond investing and trading powerhouse DoubleLine Capital, said that Trump has a history of being ”comfortable with a lot of debt and leverage,” and that won’t impede him from spending heavily. He said he believes Trump’s pledge to spend heavily on the military makes defense stocks a good investment play.”
Much more in the full article here.
MacDailyNews Take: As always, Wall Street hates uncertainty.
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