Wall Street is putting its money behind Democrat Barack Obama for president, despite worries that his administration would raise taxes and take a tougher line on trade and regulation.
The signs Wall Street reads point to Democrats prevailing in the November presidential and general election as voters punish the incumbent Republican party for a flagging economy and lengthy Iraq war.
And the fact that Obama began raking in a bigger share of the cash as his campaign picked up steam suggests that investors simply want to back the eventual winner.
Illinois Senator Obama, who captured the Democratic presidential nomination on Tuesday by gaining more than the 2 118 delegates he needed to clinch the nomination and defeat New York Senator Hillary Clinton, has received $7,9-million in contributions from the securities and investment industries, according to data compiled by the Centre for Responsive Politics.
His opponent, Republican presidential candidate Arizona Senator John McCain, banked a little under $4,2-million, putting him behind fellow Republicans Rudolph Giuliani and Mitt Romney, who have long since dropped out of the race.
Overall, Democrats had garnered 57% of the contributions from the securities and investment industry. If that trend continued through November, it would mark the first time since 1994 that they have drawn more Wall Street cash than Republicans in a presidential election year, according to CRP data.
Although the money flow has shifted dramatically this year, that Democrats have raised more than Republicans may say more about the nature of this race than Wall Street’s allegiances. Obama and Clinton needed more cash to fund their protracted battle for their party’s nomination.
As of the end of 2007, Clinton topped the cash list from Wall Street with $6,3-million. Obama was third, behind Giuliani, CRP data shows. McCain was a distant sixth.
Robert Boatright, a professor at Clark University in Worcester, Massachusetts, who studies campaign finance, said McCain’s numbers could be distorted if Wall Street were making donations to the Republican National Committee, instead of his campaign, out of concern that campaign finance rules would restrict his access to the cash.
Collision course
Investing is all about betting on what the future may hold, and presidential elections are no exception, and traders are giving the Democratic candidate an edge in November. Dublin-based Intrade, a website where contracts tied to real world events are bought and sold, gives Obama a healthy advantage over McCain.
That also helps explain why Wall Street cash is piling up in his coffers, even though many of his policy positions are less than popular among big investors.
The Securities Industry and Financial Markets Association (Sifma), which represents more than 650 securities firms, banks and asset managers, has come out in favour of making permanent the tax cuts implemented during President George Bush’s tenure. Obama has vowed to let them expire.
Sifma also supports passing free trade agreements with countries including South Korea, something Obama has opposed.
Trade is particularly important to Wall Street now because it is by far the healthiest segment of the US economy. Exports accounted for the bulk of economic growth last quarter, and virtually all of US corporate profits.
”Without international trade, the economy would be in significantly worse condition,” said Joseph LaVorgna, chief US economist with Deutsche Bank.
Obama and Clinton sparred over who would be tougher on trade as they battled over manufacturing-heavy states such as Ohio and Pennsylvania, where many voters blame globalisation for job losses. Both said they would renegotiate the North American Free Trade Agreement, or Nafta, to add more labour protections.
Andrew Busch, a global foreign-exchange strategist with BMO Capital Markets in Chicago, said the campaign rhetoric about trade could cool now that the long primary season is over.
Rewriting Nafta ”would be a disaster,” Busch said. ”We can’t go back to our trade partners and say we don’t like this or that aspect of it. Our trade partners will have a few things to say about what they don’t like.” – Reuters