Candidates for president often announce radical plans for what they’ll do once they get to the White House—but it’s a long road to sweeping change. A new president doesn’t move in and immediately enact their new policies. Nor does Congress instantly convene and say “Yeah, that all sounds good, let’s do that,” before proposing new laws in line with that new president’s policy goals.
But recent reports about how an Elizabeth Warren presidency might impact the stock market could have you second guessing every rational thing you learned about the three branches of government providing checks and balances for the United States.
Warren is a consumer advocate and an outspoken opponent of big banks and corporate interests. Among her plans as president are expanding government-run health care, Medicare, to all Americans. She also wants to wipe out student loan debt. And to pay for all of it: additional taxes on investment transactions and the earnings of very rich people.
In an April survey of investors by RBC Capital Markets, Warren was viewed as “the least stocks-friendly Democratic candidate” (51%), besting her Democratic opponent and popular guy Senator Bernie Sanders (38%). That survey showed investors were most concerned with health care stocks, along with financial, energy, and tech stocks, according to Bloomberg.
RBC also found that 90% of those surveyed think that if Democrats sweep the White House and both chambers of Congress, it’ll be “either bearish or very bearish for the stock market.”
In one alarming statement, hedge fund manager and super-rich guy Paul Tudor Jones predicted that the market would drop 25% if Warren won the presidency.
But Fortune pointed out that when Donald Trump was elected president, the stock market had a rickety few days while everyone digested the news. Mark Cuban predicted a Trump presidency would “tank” the market. But initial dips didn’t last.
Which leads us to ask: Is there any sense in trying to predict what will happen to the stock market when a presidential election approaches?
“There can always be a [market] correction,” said Joshua Sandman, a professor of political science at New Haven University. But the initial roller-coaster you might see right after someone gets elected is psychological—it’s not because of any candidate’s plans for the White House. “There’s always an initial reaction, then the market sees how the president settles into the position and who they select for posts,” he said.
And no matter who gets elected president and who’s in their inner circle of advisors, there’s still Congress to contend with.
“We now expect presidential candidates to have fairly specific policy proposals that they would implement as president,” said Michael Towle, a professor of political science at Mount St. Mary’s University. “But ... presidents are not legislators, and much of what candidates announce would require the approval of Congress. And members of Congress have their own agendas that won’t match what a president wants to do.”
Sandman said that even if democrats won control of the White House, Senate, and House of Representatives, many of those politicians would be too moderate for plans like wiping out student loan debt to quickly become reality.
Towle said that there are simply too many economic variables to pin a bull or bear market to one candidate. “All economic forecast models rely on educated guesswork about economic conditions that we don’t quite know about,” he said, from interest rates to inflation rates, tariffs, foreign currencies, and beyond.
All candidates are pressured to present detailed policy plans during their campaigns so they’re taken seriously, Towle said. Part of the reason Warren has received so much criticism at this point in the campaign is because she’s presented big plans and big ideas for making those plans happen. If she didn’t present such plans, she’d be criticized for that. “That’s why we hear so much more about the cost of Warren’s plans than Biden’s,” Towle said as an example. “She has brought this scrutiny on herself. But don’t feel too sorry for her,” he said. “The publicity is also good for her campaign.”