FLASH FRIDAY: Will Biden Be a Friend to Wall Street?

With Joe Biden seemingly headed to the White House, Wall Street traders are assessing whether a Biden administration will be good, bad or neutral for the industry.

On one hand, Biden is a Democrat, the party that tends to favor more regulation. But on the other hand, Biden’s moderate positioning within the Democratic party suggest he won’t go too far. Additionally, the likelihood of a Republican-controlled Senate means even if he wanted to go pitchfork populist, Biden likely would be stymied.

Markets have been bullish, as U.S. stocks had strong gains on Wednesday and Thursday, as votes were counted and a Biden win became more likely. However, bank stocks declined on Wednesday and overall underperformed a bit through election week, possibly indicating some investor concern about the regulatory outlook. 

To be sure, while early bets seem to be that Biden will have a light touch with Wall Street, there’s no way of knowing. If Bernie Sanders or Elizabeth Warren catches his ear, perhaps a financial transaction tax or government-mandated bank breakups will be on the table.   

And while presidential administrations come and go, the ‘unknown’ factor remains.

On Oct. 13, 2020, the Wall Street Journal published this article: ”Joe Biden Keeps Everyone Guessing on Wall Street Regulation: Candidate’s progressive shift casts doubt on how a Biden administration would regulate financial sector.” 

That thumbnail is reminiscent of a 1999 Traders Magazine article “What Are U.S. Presidential Candidates Promising?”, which said:

“Few candidates have staked out detailed positions on Social Security, taxes, bank deregulation and private savings initiatives that representatives of traders, broker dealers and their customers identify as important.

Not one of the four major candidates’ campaign organizations (representing Bush, Gore, Bradley, and former Transportation and Labor Secretary Elizabeth Dole) could elaborate specific stands on securities industry issues.

The only exception, coming from the Republican camp, was a vague assertion that the GOP favors freer markets and lower taxes.”

So for now it can only be speculated what a Biden would mean for Wall Street — if he does become President, the industry will find out for sure starting in January.