Analysis: Progressive or moderate? How a Biden cabinet could impact U.S. stocks

In this news, we discuss the Analysis: Progressive or moderate? How a Biden cabinet could impact U.S. stocks.

NEW YORK (Reuters) – If Democratic challenger Joe Biden wins, as polls suggest, some on Wall Street look to his cabinet choices to assess whether he will rule as a pro-business moderate or push for legislation progressive that could weigh on sectors such as financial and oil, but bolster clean energy.

Among the cabinet posts most likely to have an effect on stock prices are the Treasury Secretary, who could oversee a $ 2.2 trillion stimulus bill backed by House Democrats, and transportation , which will likely oversee a vast array of infrastructure to accelerate the development of electric vehicles as part of Biden’s $ 2 trillion climate change plan.

Progressive lawmakers are pushing him to exclude any business executive or lobbyist from potential positions, people involved have told Reuters. Biden said he would also consider Republicans for his cabinet, although that is unlikely for the Treasury chief as it would result in a major fight with progressives who have an eye on that role in particular, according to people close to. countryside.

Overall, the former vice president leads by 10 points in national polls, although his lead is narrower in battlefield states that are likely to tip the election.

“A cabinet that is not dominated by the progressive end of the Democratic spectrum would be viewed more favorably by the market” and alleviate fears of increased regulations under a Biden administration, said Liz Ann Sonders, chief strategist of investments at Charles Schwab.

The COVID-related recession, and the divergence in fortunes of the so-called ‘K-shaped’ recovery between the rich and everyone else, has reinforced a fundamental progressive argument that American capitalism largely favors the rich and must be reformed.

Progressive policies lean towards more government-run health care, providing subsidies for tuition fees and increasing workers’ wages, while moderates support private health plans and are less inclined to support government spending on big projects like the Green New Deal.

Senator Elizabeth Warren of Massachusetts, a progressive who is seen as one of Biden’s possible choices to lead the Treasury, called for strengthening the walls between commercial and investment banks, strengthening consumer protection and allowing the US Postal Service to partner with credit unions to provide basic consumer banking services.

Fed Governor Lael Brainard and former Deputy Treasury Secretary Sarah Bloom Raskin are also among the most likely selections here for the Treasury position. Another possible choice is Rhode Island Governor Gina Raimondo, according to the Washington Post.

The Biden campaign and representatives for Warren, Raimondo and Brainard did not respond to requests for comment.

“Brainard would be a strong and safe choice for a Biden administration,” said Kevin Gallagher, director of the Global Development Policy Center at Boston University. He cited his experience working at the Treasury under the Obama administration, a previous role in the White House under former President Bill Clinton, and his current role as a member of the Federal Reserve.

“The question is whether she is seen sufficiently in tune with the more progressive wing of Biden’s coalition,” Gallagher said.

While Warren and Brainard are qualified, “the foundation of Warren’s career has been attacking the banking industry,” said Mike O’Rourke, chief market strategist at JonesTrading, in a September research note this which “would probably shake investor confidence”.

Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, said in a recent research note that the market appeared to underestimate the possibility of firm picks like Warren that would be negative for the market.

The S&P 500 financial sector is down 1% since the first Trump-Biden debate on September 29, compared to a 2.8% decline in the S&P 500 index as a whole, according to data from Refinitiv.

A selection of Warren would likely only come with a blue wave that gives Democrats at least a 2-3 seat advantage in the Senate so as not to allow Gov. Charlie Baker of Massachusetts, a Republican, to select Warren’s replacement, Steve Chiavarone said. , portfolio manager at Federated Hermes.

“Biden’s Senate margins are going to be the really important thing to watch here,” he said.

The transportation secretary, whom Presidents George W. Bush and Barack Obama both filled with a member of the opposing party in a display of bipartisanship, will be a more low-key choice that could have broad market implications.

Shares of clean energy companies and electric vehicles surged last month in anticipation of a Biden victory.

“In an environment where you could see significant infrastructure spending and additional regulation in terms of electric vehicles and fuel standards, this can be a relatively important economic position,” Chiavarone said.

Additional reporting by Trevor Hunnicutt and Andrea Shalal; edited by Megan Davies and Dan Grebler

Original © Thomson Reuters

Originally posted 2020-11-03 11:56:12.

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