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Election

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Great note this weekend from Stifel's Washington Policy Team.....

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Even at this late stage, it is exceedingly difficult to have real conviction regarding the election's outcome. In this period of great uncertainty, all we can moor ourselves to is a firm belief that the Senate will flip to Republican control. The House will come down to a couple dozen seats, a handful of which are in California and could take time to call. As for the White House, we continue to view Trump as a very slight favorite given our read of state level data and his recent momentum in the polls, but this appears to be an exceedingly close election that could go either way. Heading into the election,we maintain our 55% odds of Trump winning, 75% odds of the Senate flipping to GOP control, and our 55% odds of the House staying under Republican control.

What Are Big Market Themes Under A Trump White House?

If President Trump returns to the White House, we would expect it to be positive for: (1) M&A and consolidation; (2) Fannie Mae (FNMA, Not Rated)and Freddie Mac (FMCC, Not Rated) as there would be a pronounced effort to end the conservatorships; (3) private prisons such as Geo Group (GEO, Not Rated)and CXW (CXW, Not Rated) given the focus on immigration enforcement; (4) fossil fuels, nuclear energy, and clean coal; and (5) companies in the digital asset ecosystem such as Coinbase (COIN, Not Rated), MicroStrategy (MSTR, Buy, $180PT; Analyst: Harte), and Riot Platforms (RIOT, Buy, $22 PT; Analyst: Lewis).The biggest negative theme for markets would be Trump's embrace of tariffs,which could lead to retaliatory tariffs, a global trade war, and an average after-tax reduction in household incomes of ~$1,800. The threat of a trade war, coupled with enhanced immigration enforcement, has led many investors to suggest that a Trump II administration could slow growth and ramp inflation.

What Are the Big Market Themes Under A Harris White House?

We do not believe that a Harris administration's policy priorities would differ materially from the Biden administration. There are arguments to be made at the margin on certain economic policies, and we would expect a different tone on foreign policy, but many Harris policies are substantively similar to Biden policies. Therefore, we would largely expect the status quo on energy,healthcare, tech, M&A, and financial services. From a market perspective, a Harris administration would mean that the IRA's clean energy tax credits are safe, the threat of a global trade war is lower, and taxes would move modestly higher for high earners and possibly businesses depending on the composition of Congress.

What Are Some Market Themes No Matter the Outcome In November?

1. Manufactured Housing. We believe that policymakers on both sides of the     aisle are cognizant of the nation's housing supply shortage and     conceptually supportive of policies aimed at addressing that shortfall.     This is likely to take the form of tax credits in next year's tax package,     but we also firmly believe there will be continued financing support for     manufactured housing from government agencies. As a matter of context,     manufactured housing costs ~50% less to produce than site-built homes. We     continue to believe that additional government support for manufactured     housing should be directionally positive for companies in the space     including Champion Homes (SKY, Not Rated) and Equity Life Style Properties     (ELS, Not Rated).
2. Defense Sector.     With a Democrat in the White House, there would be far more connectivity     with partnerships across the globe, and a push to support allies with     military aid. With a Republican in the White House, there would be far     more support for defense spending in general. There could be more of an     isolationist bent, especially in a Trump II administration, but the path     of least resistance is through continued and steadily increasing defense     funding.
3. Small Business Lending. Vice President Harris has proposed increasing the     small business startup tax deduction from $5,000 to $50,000. While the     ~$3B per year cost could result in some changes, we believe the odds of     increasing the startup deduction during next year's tax reform effort are     high no matter the outcome in November. We would view an increase in the     business startup tax deduction as positive for small business lending     originations, which could benefit large SBA lenders like Live Oak Bank     (LOB, Not Rated) and Huntington Bank (HBAN, Not Rated).
4. Wells Fargo Asset Cap. We continue to believe that Wells Fargo (WFC, Not     Rated) is moving closer to having its asset cap lifted. The firm has     continued to make steady progress on resolving legacy issues, and we     believe the Fed's $1.95T asset cap on the bank could be lifted next year     no matter the outcome of November's election. Our view is informed by 3     key points: (1) the bank has made meaningful progress in resolving issues     as evidenced by 6 consent orders being lifted under CEO Charlie Scharf's     tenure; (2) for an asset cap to become a viable tool in the regulatory     toolbox, logic suggests that it must eventually be lifted or else it is     little more than permanent purgatory; and (3) press reports suggest that     the bank is steadily moving through the Fed's regulatory checklist. We     don't view the Wells Fargo asset cap as being a political issue, but     rather an ongoing process that could end next year.
5. No One Is Going to Tackle the Deficit. From our seat, deficit hawks are the most endangered     species in the nation’s capital. With over $4.6T in tax cuts expiring at     the end of 2025, one would think that policymakers would use the     opportunity to have a serious and sober discussion about the nation’s     fiscal predicament. We firmly believe, however, that Washington will     continue its deficit-financed spending next year no matter who wins in     November. Policymakers are either unwilling or unable to act to alter the     nation's unsustainable fiscal trajectory. This is due in large part to     policymakers being unwilling to make tough choices carrying political     consequences, but there is also an overarching comfort due to the     centrality and importance of the U.S. dollar and the U.S. Treasury market.     Ultimately, with elected officials unlikely to act, we believe only the     bond market can force Washington to accept any modicum of fiscal     discipline.

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Corporate America is ditching wokeness — but expect it to remain in government if Kamala Harris wins-NY Post

Sorry, Professor, America hates all things woke — whether it’s a trans woman activist half-naked giggling in a bubble bath hawking Bud Lite, or employees from working-class backgrounds being forced to admit to their “white privilege” during mandatory corporate diversity training performed by elitists from the Ivy League.

They don’t want to have to pay more for gas because BlackRock thinks it’s swell to charge extra fees for ESG portfolios.

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Election 2024: Harris, Trump present ‘diametrically opposed’ impacts on ESG-ESG Dive

“A Harris administration would be more favorable for the interests of ESG investors whereas a Trump administration would be antagonistic,” according to Morningstar Indexes’ head of strategy

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Bingo. Which is one reason why we believe that investing in companies that are politically neutral will provide an edge.

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ShareholdersfirstETF.com

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BlackRock Took ESG Fund Hit in Third Quarter, Morningstar Says-Bloomberg

For the first time in at least 3 1/2 years, BlackRock Inc. has seen clients withdraw more cash from its ESG funds in Europe than they allocated amid an apparent retreat from passive strategies, according to a fresh analysis by Morningstar Direct.

Internal CIA documents, presentation show effort to mandate DEI at the center of the intel agency-Just the News

A newly revised Diversity, Equity, Inclusion, and Accessibility (DEI) strategy for the Central Intelligence Agency promises to put diversity at the center of promotion decisions and attempt to solidify programs to withstand changing administrations, according to internal documents and a public presentation by senior agency diversity official.

Boeing Dismantles Diversity Team as Pressure Builds on New CEO-Bloomberg

Boeing Co. has dismantled its global diversity, equity and inclusion department, making it the latest high-profile corporation to make changes to its DEI policy as its new top leader oversees a broader revamp of the company’s workforce.

Too little, too late?

Nike Names Kizmet Mills as Its Fifth DEI Chief Since 2020-Yahoo Finance

“At Nike, we strive to be leaders in fostering a strong culture of belonging and believe that the work of our Diversity, Equity and Inclusion team is critical to helping us achieve this mission,” Nike said in a statement. “Having held senior leadership roles within the company for more than eight years, Kizmet is well positioned to continue advancing Nike’s goals of championing all athletes.

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State Treasurers and Investors Urge Top US Companies to End DEI Initiatives, Labeling them as ‘Discriminatory’-Turning Point USA

State treasurers and financial officers from 17 states, along with 60 investors, have sent letters to leading US companies in the Fortune 1000, calling for an end to diversity, equity, and inclusion (DEI) initiatives. According to a report by The Daily Wire, the letters warned that DEI policies could violate companies’ fiduciary responsibilities and expose them to potential legal challenges.

Companies Are Dropping the D or E From DEI to Avoid Criticism-Bloomberg

After a backlash against DEI programs by conservative activists, a majority of executives in a new survey said that their companies have changed how the initiatives are described with reduced emphasis on racial diversity.

Among more than 60 executives, slightly above 50% said their firms adjusted terminology, with another 20% considering similar changes, according to a survey by the Conference Board. In many cases, companies are dropping “equity” from descriptions because it’s seen as the most controversial term, said Andrew Jones, a senior researcher at the Conference Board’s ESG Center and co-author of the study.

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The Most Absurd DEI Moments Under Biden-Harris-Daily Wire

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Biden-Harris Administration Pushed Far-Left Ideology With 500 ‘DEI Actions,’ Report Finds-Daily Wire

“The Biden-Harris Administration has taken steps to ensure that DEI infiltrates every nook and cranny of the federal government, from healthcare agencies to national security,” the report from Do No Harm explains. “On day one of his administration, President Biden issued Executive Order 13985, entitled -Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.’”

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Dozens of Federal Entities Developed ‘Equity Action Plans’ as Part of Biden-Harris Whole-of-Government DEI Push-National Review

Over the past four years, more than 80 federal entities have developed "Equity Action Plans" leading to over 500 active or planned DEI actions, according to a report from medical watchdog Do No Harm obtained by National Review.

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Really?

‍ESG ratings nearly as crucial as returns for Canadian investors, study finds-Benefits and Pensions Monitor

Findings show that ESG ratings play a significant role in influencing investor preferences for investment funds, ranking only behind a fund’s past performance.

Private-Equity Firms Stick Fund Investors With ESG Bills-WSJ

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Companies boost social and climate reporting amid ESG backlash-Reuters

The trend shows the importance investors and regulators now place on environmental, social and governance (ESG) issues, analysts said, amid rapid global warming and shifting workforce demographics. Some political conservatives call the attention misplaced or worry the disclosures could give activists leverage to force companies to make unnecessary changes.

Former Disney Exec Blames Hollywood’s Collapse on Woke DEI Policies Forced by Investment Firms-Breitbart

Harris pointed to how many corporations are failing so badly, with companies such as Target, Kellogg’s, and others suffering boycotts and loss of revenue thanks to the indulgence of woke, DEI policies. And she said Hollywood is suffering the same short-sighted obsession over such policies.

Elon Musk Warns Saudis Of Dangers Of 'Woke' AI-Barron's

Billionaire Elon Musk on Tuesday warned a Saudi investor forum about the dangers of artificial intelligence models he said were "woke" and "nihilistic" rather than "maximally truth-seeking".

Seinfeld Rips Elite Private School for Woke Policies-Newsmax

Seinfeld lamented the school was teaching its students to fold under pressure rather than deal with life's unpleasant realities. "To encourage them to buckle. This is the lesson they are providing, for ungodly sums of money," he added.

How the Democrats Bungled the Politics of Immigration-WSJ

In his first weeks in the Oval Office, President Biden made a sharp U-turn on Trump’s immigration policies. He ordered a halt to building the border wall, suspended deportations and ended a Trump policy forcing asylum seekers to wait in Mexico. His 28 executive orders on the issue included rescinding a Trump policy making every migrant who crossed the border illegally subject to deportation, not just those who later committed a crime. And he sent a bill to Congress to legalize 11 million people without permanent legal status. It went nowhere.

Gavin Newsom Wants a Climate Bailout-WSJ

Unwilling to renounce climate religion, he directs his regulators “to pursue any federal funding available to help lower electricity costs for Californians.” That sounds like he wants people in states with more sensible energy policies to subsidize progressive lunacy. That’s what the Biden Federal Energy Regulatory Commission is trying to do via a regulatory back door.

After Dumping Cash Into Migrants, Diversity, FEMA Failed To Answer Nearly Half Of Calls From Hurricane Survivors-Daily Caller

The Federal Emergency Management Agency (FEMA), which is short on resources after spending hundreds of millions on migrant services and “equity” programs, failed to answer roughly half of the phone calls made by survivors of Hurricanes Milton and Helene.