The stock market is getting pummeled today, with the major indices down about 1.5%, and the Dow Jones down 444 points.
There’s a lot of talk about what’s behind the Dow Jones selloff.
A lot of analysts are pointing to ongoing recession fears. The manufacturing index has cratered, and private payrolls only grew by 135,000. There is ongoing concern regarding the trade war with China. Many analysts don’t like the uncertainty of the impeachment process regarding Congress and Donald Trump.
While all these things are certainly contributing to the Dow Jones selloff, there is a stalking horse that is likely primarily responsible for today’s stock market downdraft.
The Boogeyman is Elizabeth Warren
Ed Butowsky, managing partner at Chapwood Capital Investment Management, told CCN that it all has to do with next year’s election…and Elizabeth Warren.
“Elizabeth Warren is the real reason the stock market is spooked today. This is likely to continue. Bernie Sanders now has serious health concerns, so he may drop out of the race. Joe Biden is looking weaker. The worst outcome for the stock market would be for Elizabeth Warren to become either the nominee, or worse, president.”
Butowsky goes on to say that Elizabeth Warren is a long history of radical leftism. She is an outspoken anti-capitalist. Her famous line, “You didn’t build that. Someone else did,” will be forever remembered as the tagline for big government proponents.
The stock market would be unhappy with a Joe Biden presidency, but it would ultimately manage to muddle through. While Biden is significantly left – of – center, he’s not an out and proud socialist the way Elizabeth Warren and Bernie Sanders are.
To the Dow Jones and the stock market, Butowsky says, there is a significant difference.
The CFPB is The Big Tip
Elizabeth Warren came on the scene during the Barack Obama administration. She was hired as the so-called architect of the infamous and overreaching Consumer Financial Protection Bureau.
The CFPB proved to be one of the single greatest capital investment chillers for Wall Street during the Obama years.
Elizabeth Warren’s philosophy is all over the CFPB, and the bureau’s draconian methods of dealing with financial services companies of every stripe were delivered by fellow Democrat Richard Cordray.
I spent a lot of time in the capital markets during the Obama administration, and working with a number of companies that were the targets of CFPB assaults.
There is no question that Elizabeth Warren’s vision not only stymied economic growth but wreaked havoc with the financial services markets in the country at the time. There is no question that the CFPB was a huge drag on the economy.
Wall Street didn’t forget this, and neither has the stock market.
Financial Services Are The Key
Financial services, whether they be payday lenders or gigantic banks or credit card companies, are the second most important sector behind technology in terms of economic growth.
Wall Street might not be so terrified of Elizabeth Warren if she only wanted to go after an individual sector here or there.
Yet the problem is that, besides financial services, she’s also going after big tech. One of the reasons the market is tanking is because she has openly called for regulatory breakup of Google, Facebook, Amazon, and other tech firms.
We’re not talking about a long antitrust trial. We’re talking about Elizabeth Warren instigating regulatory fiat to get her way.
She’s also going after the third most important economic sector, which is healthcare.
Warren Wants Free Healthcare
As she is a proponent of government-run healthcare, the entire healthcare industry is terrified of what she would do to the bottom line. Despite the fact that Big Pharma is under assault even by the Trump administration, as far as drug pricing goes, that sector is confident that reasonable negotiations could be tackled.
Under a Warren presidency, there would be no negotiations.
Don’t underestimate how much the Dow Jones is going to be roiled in the next year over the presidential election.
At this point, the stock market’s best hope is a declining Joe Biden facing off against Trump.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.
Last modified (UTC): October 3, 2019 11:23 AM