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NEW YORK / LONDON: Financial executives around the world are hoping for a clear winner in the US election after President Donald Trump, without evidence, claimed to have committed a crime in the fight for the White House, stoking fears of a recount prolonged period that will keep markets nervous.
While the Republican incumbent has granted the financial industry huge tax breaks and victories in deregulation, Trump’s first term has also been marked by volatility and unpredictability, particularly in international trade.
Wall Street has leaned to the left in this election, with Democratic challenger Joe Biden beating Trump in fundraising from the financial industry.
Many executives said they did not support all of Biden’s policies, but said they believed it would be more predictable and better for the country.
“There was a lot of concern about this election. There were people expecting violence. The White House was hemmed in,” said David Bailin, chief investment officer for Citi’s private banking division.
“Guess what? Now we have something to worry about. If there had been a clear election result, there would have been a busy day. A protracted fight, given the kind of tensions, could be something uglier,” he said.
Global investors on Wednesday began reversing some of Biden’s trades that had caused a jump in major Wall Street indices on Tuesday.
“People are mostly talking about banks these days – they are the worst performing sector as the likelihood of a blue wave and a big stimulus plan from Biden recedes,” said Paul Leech, co-head of stocks at Barclays.
Several financial markets, including US stock futures and the US dollar, turned as voting projections for swing states appeared to favor Trump.
Bank stocks in Europe fell, with the STOXX index of European lenders falling 2%, while the major exchanges in London, Paris and Frankfurt rose 0.2% to 0.3% at 1130 GMT.
London-based banks that manned trading floors overnight reported a long night talking to nervous customers. The highest commercial activity was recorded in the early hours of Wednesday, before volumes fell sharply before dawn.
Jim McCormick, global head of desk strategy at British investment bank NatWest Markets, said it would be “all set” with the outcome so uncertain.
Analysts said it could be days before all the votes are counted.
The experience was very different from November 9, 2016, when, without a pandemic, New York City and other financial centers threw informal parties in bars, and Trump’s victory was announced around 2.30 a.m.
While there were few signs of disruption or violence at polling places Tuesday, Trump’s claim to cheat in the election without citing evidence left some finance executives wondering if it was too early to rule out civil unrest.
“There are no issues at the moment, but that’s only because there is no answer at this time,” said Billy Weber, chief executive of Checkpoint Capital, a fixed income platform.
Others said financial firms could capitalize on the volatility.
“You start to see clients increasingly looking to hedge any of the positions, so you start to see volumes increase in risk management products,” said Johann Scholtz, Equity Research Analyst at Morningstar.
(For the latest results and news on the US elections, click: https://www.reuters.com/world/us-election2020)
‘PERFECT STORM’
The S&P 500 Index has risen 48.8% during Trump’s tenure, which he has frequently cited as a measure of success. But Trump has not been uniformly loved by the financial industry.
He has attacked corporate leaders, including JPMorgan Chase & Co CEO Jamie Dimon, and Wall Street bosses have distanced themselves from Trump in receiving criticism for his handling of the pandemic and racial justice protests.
But the American financial industry is also concerned about higher corporate taxes, a new enforcement crackdown, and an emboldened consumer watchdog under Biden.
The former vice president has presented himself as someone who will unify the country and has aligned himself with progressives who are fiercely critical of Wall Street.
Regardless of the winner, the global financial community prefers a decisive outcome.
“If we get a Biden win and a split in terms of the Senate staying with the Republicans and Democrats in Congress, I think the markets would probably take it worse,” said Devan Kaloo, global chief equity officer at Aberdeen Standard Investments.
Still, some young Republican finance executives said they hoped to come together to celebrate a Trump victory.
Charles Kolean, a 25-year-old investment industry worker who spent months raising cash to re-elect Trump, said he had reserved a section of a Dallas bar where he and about 100 friends planned to toast another four years for the president. although they wore masks.
“The perfect storm is gathering to make Donald Trump a two-term president,” he said.
(Reporting by Imani Moise, Svea Herbst-Bayliss, Lawrence Delevingne, and Anna Irrera; additional reporting by Suzanne Barlyn, Iain Withers, Lawrence White, and Simon Jessop, written by Lauren LaCapra and Sinead Cruise; edited by Michelle Price, Peter Cooney, Peter Graff and Barbara Lewis)
