For the first time in more than 10 years, wealthy financial donors are giving more money to the Democratic Party than to Republicans.For the past four years, the Trump administration has put a heavy emphasis on keeping the stock market alive and healthy. And to be fair, the stock market has performed incredibly well over the past several years, even with the threat of the COVID-19 pandemic disrupting the economy.
However, it doesn’t seem like Wall Street executives are as enthusiastic about Trump as he’d like them to be. For the first time in more than 10 years, wealthy financial donors are giving more money to the Democratic Party than to Republicans. More than half of the $800 million donated to politicians from organizations like securities firms, banks, and real estate companies went to Democratic politicians—an extremely rare move for the industry. This happened in 2008, with many of these organizations backing Barack Obama, but overwhelming, the trend has favored Republicans.
It’s also worth noting that people are donating more money than ever before; financial backers are more willing to part with money if it means backing their favorite political candidate (and party).
But with so many of Joe Biden’s prospective policies being questionable or even bad for people in the financial industry, why is this the case? Why is Wall Street backing Joe Biden?
The Case Against Biden
Regardless of how you personally feel about Joe Biden, it seems clear that many of his policies could directly work against Wall Street.Regardless of how you personally feel about Joe Biden, it seems clear that many of his policies could directly work against Wall Street. For example, Biden is proposing an overhaul to income taxes, increasing the tax rate for top earners. Like many Democratic politicians, he’s also in favor of government spending, which could contribute negatively to the federal deficit, ultimately weakening our economic position. On top of that, Biden is pledging to address workplace and economic issues (including inequities) that could cause disruptions in the financial sector.
It would also seem like if you’re interested in stock market performance overall, there’s a significant motivation to keep Trump in the White House. Again, regardless of your personal feelings, the stock market has performed extraordinarily well over the past 4 years, and under the Trump administration, it would likely continue to perform well in the future.
So why are Wall Street leaders going for the seemingly riskier candidate?
There are many potential explanations here:
Biden’s moderation. First, we need to acknowledge that relatively speaking, Biden is a moderate candidate. He aligns with Democrats on many key issues, but he’s not nearly as left-wing as other proposed presidential candidates like Bernie Sanders. Historically, Wall Street has opposed left-wing candidates with fervor, but a moderate-left candidate like Biden automatically seems more appealing.
The unpredictability of Trump. More to the point, Trump is extremely unpredictable. There seems little debate that Trump is one of the most volatile and least consistent presidents we’ve ever had. He flips back and forth on key policies. His promises are frequently broken. His threats are often outlandish. His tweets have the power to drive everyone in the world crazy. It seems uncertain what the result of 4 more years of Trump would be—which makes it incredibly difficult to make any reasonable mid-term or long-term decisions as an investor or financial organization. We’re already seeing some of the results of this unpredictability; despite overall good performance, the stock market has been unquestionably volatile, and its response to certain events has been downright confusing for the average investor.
Confidence in the Federal Reserve and Congress. The stock market rallied despite the devastating economic impact of the COVID-19 pandemic. Why? Because the United States borrowed and printed a ton of money to serve as an economic stimulus. It seems like even under Republicans, our country is willing to put itself deep into debt and risk the prospect of inflation if it means offsetting some short-term economic damage.
Important issues. It could also be that people in the financial industry are starting to value some important issues more than money or economic performance. For example, global climate change is a major priority for many Americans, and Biden is proposing tougher restrictions on oil, coal, and other industries contributing to environmental damage. For many people on Wall Street, these stricter regulations are well worth the cost.
Overall approval ratings. In terms of public approval, Trump isn’t doing that well. Approximately 53.1 percent of Americans disapprove of Trump, with 42.5 percent approving of him. It could be that the prevailing dislike of Trump is enough to counteract whatever positive economic impact he might carry.
Polarization and revenge politics. It’s no secret that this country has become more polarized, at least politically. People are less likely to feel lukewarm about both presidential candidates, and more likely to worship one while condemning the other as a villain. The dominant rhetoric from both sides attempts to cast the other side as terrible, and for Democrats, that means leading a narrative charge of revenge; Biden wants to undo many of the changes and policies that Trump has made, not necessarily because they’re individually bad, but because he wants a “win” for his side. Politics is often a pendulum—a series of responses in the form of back-and-forth swings—and donors and voters may both be ready for the anti-Trump swing back to normalcy.
The Long-Term Consequences
What are the long-term consequences of this trend? It’s hard to say exactly what a Biden presidency would look like, even for the stock market and the economy at large. However, it seems clear that Trump is losing favor in some key areas—and obvious that Wall Street is more than willing to abandon Republicans under the right conditions. We’re definitely in a new era of American politics, and it will be interesting to see how it develops from here.