Is fear of a Sanders presidency bern-ing markets?

Fears about the spread of coronavirus, to be sure. But a chorus of analysts also thinks concerns about Vermont Senator Bernie Sanders winning the Democratic presidential nomination — and possibly even the presidency — are also contributing to jitters.

“The risk to US stocks is pretty significant if Bernie gets the nomination,” said Ed Moya, senior market analyst with OANDA. “I think there is concern that in some of these battleground states Bernie is beating Trump. If he does maintain that momentum, it would be very concerning to Wall Street.”

Of course, “concerning” Wall Street is precisely what Sanders is after. Last June, the longtime Democratic Socialist put it this way in a tweet:

Sanders also intends to end exports of coal, natural gas and crude oil, institute a wealth tax, and many more things that make the powers that be very uncomfortable.

There’s a long way to go before November. Sarah Bianchi, Evercore ISI’s head of U.S. public policy and political strategy research put it in a Monday note, “If there is anything we have learned in this political environment, it is that things can change really fast. And, of course, if there is something to remind us that the unpredictable can happen, it is the last time we went through a Presidential election, where few thought President Trump would win.”

Bianchi served as a policy adviser in both the Obama and Clinton administrations. But as Tom Porcelli, chief U.S. economist for RBC Capital Markets, wrote late last week, the possibility of Sanders beating Trump “is not a zero probability event.”

“Moreover, if Bernie did beat Trump that likely would mean turnout was high among Democrats, so grabbing full control of Congress cannot be ruled out,” Porcelli added. “A Bernie presidency that is frustrated by a Republican-controlled Congress is very different than a Bernie presidency with Congress behind him and a mandate to tweak the US economic machine in his vision. The market is seemingly far from pricing any degree of probability that this event comes to fruition.”

In contrast, James Ragan, director of wealth management research at D.A. Davidson, noted that investors may be starting to notice Sanders’ rise to front-runner status. That’s “contributed to market volatility,” he wrote.

Bianchi plans on watching Tuesday night’s South Carolina debates closely to see if any of the other Democrats can “slow the Sanders primary sweep,” as well as “any signs of alliances or consolidation in the moderate/non-Sanders lane that can make it a force to compete against Sanders.”

The debate comes amid growing fears about the spread of the coronavirus beyond China, which has resulted in more than 80,000 cases and 2,700 deaths and begun to seriously rattle global stock markets. The Dow Jones Industrial Average DJIA, -1.58% was trading down more than 300 points Tuesday, a day after U.S. stocks suffered their worst day in two years.

Moya told MarketWatch that he expects Sanders to draw the most fire at Tuesday’s debate, as well as some downgrading of candidate ambitions, from the Oval Office to the vice presidential slot.

“The country is not ready for Bernie’s initiatives,” Moya said. “In a few more presidents the country might be a little more open to Healthcare For All and maybe a little greater call to regulation but in this election you will probably see Trump remain the front-runner.”


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya