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Dow Futures on Edge as Traders Fear Democrat White House

Last Updated September 23, 2020 1:03 PM
Ben Brown
Last Updated September 23, 2020 1:03 PM

The Dow Jones Industrial Average (DJIA) futures market was cautiously higher in early trading Thursday, pointing to an uncertain open on the US stock market.

It comes as traders grow increasingly nervous about the prospect of a Democrat White House in 2020. Specifically, an Elizabeth Warren White House. According to an RBC Capital Markets survey , the number of money managers expecting Trump to win re-election has declined for the second time running.

“Most still think Trump will win re-election in 2020, but those holding that view declined for the second survey in a row” – Lori Calvasina, RBC Capital Markets.

The Democrats are gaining pace.

Dow futures creep cautiously higher

At of 5.13 am ET, Dow Jones Industrial Average (DJIA) futures  crept 0.2% higher after trading flat for most of the overnight session.

Dow (DJIA) futures chart stock market
Dow Jones Industrial Average (DJIA) futures traded cautiously higher on Thursday as fears of Democrat White House mount on Wall Street. Source: Yahoo Finance

S&P 500 futures  mirrored the Dow’s 0.2% bump while tech-heavy Nasdaq Composite futures  could only manage 0.16%.

Elizabeth Warren victory: “bearish or very bearish” for US stock market

One metric that stands out in the survey is the rising presence of Elizabeth Warren among investors. In the June poll, Wall Streeters put her chance of victory at just 7%. Fast forward to September and it’s now 39%.

“Those expecting Biden to win the Democratic nomination fell as those expecting Warren to win the nomination rose sharply.”

Elizabeth Warren gaining for 2020 victory
Elizabeth Warren is gaining for 2020 victory against Biden. | Source: RBC Capital Markets Survey

Today’s PredictIt measure  also puts Warren as the front-runner for the Democratic nomination.

Investors see this as a hugely bearish outcome for the stock market. Last week, investor Leon Cooperman joked :

“They won’t open the stock market if Elizabeth Warren is the next president.”

Warren ‘wrote the book’ on reigning in Wall Street and now runs on a platform  of raising corporate taxes, breaking up tech giants, and cautious free trade. Cooperman sees a 25% drop in equities if Warren gets the keys to the White House. 

Biden is more neutral for the Dow

On the flip side, Wall Street is less concerned about a Joe Biden presidency. A majority 52% investors see his victory as neutral for the stock market. 19% think it’s a bullish outcome. His platform of free-trade isn’t likely to disrupt the markets.

However, any other Democrat would be bearish, according to 89% of Wall Street respondents.

Warren presidency bearish for stock market
A Biden victory wouldn’t impact the Dow, the survey reveals.| Source: RBC Capital Markets Survey

Stock market shrugs off impeachment fears

Although Democrats are gaining ground, Wall Street is shrugging off the looming impeachment threat against Donald Trump. Given the Republican majority in the Senate, the chance of impeachment is incredibly low. So much so that it has never happened in US history.

“The Senate is just going to ignore it… it’s probably at worst a distraction. I really don’t think investors will take the risk of impeachment seriously at this point. If there’s really strong damning evidence, that’s a different matter” – Jack Ablin, Cresset Wealth Advisors .