As Mitt Romney accepts the Republican Party’s presidential nomination this week, he will try to convince voters across the nation that he has the executive experience and business savvy needed to strengthen its economy – and that he’s the best person to lead the country.
Americans may be evenly divided on that question – Romney leads President Obama 47 percent to 46 percent in a new Washington Post/ABC News poll of likely voters – but Wall Street has already made its presidential preference clear. After supporting Obama in 2008, financial firms and the people who work at them have lined up squarely behind Romney, the man from Bain Capital, this year.
So far this election cycle, workers in the securities and investment industries have donated $11.5 million to Romney compared with $4.2 million to Obama, according to the Center for Responsive Politics. As of August 21, the five largest contributors to the Romney campaign's war chest have all been big financial institutions (see chart below).
Overall, the securities and investment industries have given more than $67 million to Republican campaigns and less than $40 million to Democrats. That excludes contributions to Super PACs, where the balance of Wall Street donations has been even more skewed toward Romney and conservative groups. Donors in the securities and investment industries have given nearly $51 million to outside groups this election cycle, with nearly $44 million of that going to conservative groups, according to the Center for Responsive Politics.
Top Contributors to the Presidential Candidates
|Barack Obama ||Mitt Romney |
|University of California||$491,868||Goldman Sachs||$676,080|
|Microsoft Corp.||$443,748||JPMorgan Chase & Co||$520,299|
|Google Inc.||$357,382||Morgan Stanley||$513,647|
|DLA Piper||$331,715||Bank of America||$510,728|
|Harvard University||$317,516||Credit Suisse Group||$427,560|
|Source: Center for Responsive Politics; Data as of 8/21/2012|
Those trends are a stark change from four years ago. By the end of the 2008 campaign, workers in those industries funneled nearly $97 million to Democrats and less than $73 million to Republicans. The sector favored Obama even more heavily, donating nearly $16 million to his campaign, compared with $9.2 million to his Republican opponent, Sen. John McCain of Arizona.
Brokers, bankers and traders may fear that Obama will hike taxes, tighten financial regulations and work to push through stricter interpretations of laws like the 2010 Dodd-Frank act, parts of which have yet to be implemented. They may also have been turned off by some Obama comments. “I did not run for office to be helping out a bunch of, you know, fat cat bankers on Wall Street,” the president told CBS’s “60 Minutes” in a December 2009 interview that illustrated the deteriorating relationship between the White House and the financial sector.
Romney, by contrast, has staked his campaign on his business record, and most specifically his experience at Bain Capital – experience that has come under fierce criticism from President Obama’s camp, and even from fellow Republicans in the primary campaign. "The lessons from that time would help me as president to fix our economy, create jobs and get things done in Washington," Romney wrote in a Wall Street Journal Op-Ed on Friday. "I know what it takes to turn around difficult situations," he added.
A turnaround is just what some on Wall Street want. “I have never ever in my lifetime seen such dysfunctional politics in Washington,” 72-year-old Ted Weisberg, the founder of Seaport Securities, told The Fiscal Times recently. “The election here is huge, because if the current policies are not going to change – or, if anything, get reinforced – that means that we’re looking at another 3.5 to 4 years of nowheresville. And this country desperately needs a change.” And if Romney wins? “If there is a change, I think the market will roar,” Weisberg says, “because so much of stock trading is about confidence and what I call the feel-good factor.”
Not that stocks have suffered under Obama. The S&P 500 has risen from 850.12 on the last trading day before Obama was inaugurated to 1,411.13 on Friday – a gain of 66 percent.
Conventional wisdom has long held that Wall Street favors Republicans, despite numerous analyses showing that stocks have tended to perform better under Democratic presidents. Then again, which party holds the Oval Office may not matter for Wall Street as much as other factors. Since 1900, the Dow Jones Industrial Average has gained an average of 8.5 percent under Democratic presidents and 6 percent under Republicans, according to Russ Koesterich, chief investment strategist at BlackRock’s iShares ETF business. (Those figures both exclude dividends.) “When you adjust those averages for the market’s volatility,” Koesterich wrote in a recent whitepaper, “the numbers are statistically the same. The party affiliation of the president has had no consistent influence on stock market performance.”What can matter more, Koesterich writes, are policy choices. “For investors looking to handicap the impact of November’s elections, we believe there are three policy prisms through which to judge the outcome: potential for avoiding the ‘fiscal cliff,’ impact on tax policy, and the extent to which the outcome raises or lowers the likelihood of dealing with longer-term imbalances, specifically the unsustainable nature of the current entitlement system and the growing dysfunction of the US tax code.”
Koesterich also says the notion that markets fare better under divided government – and the gridlock it all but ensures – is also a myth, one that seems to have gained acceptance during the 1990s bull run. “The argument goes that divided government moderates the worst instincts and excesses of each party,” he explains. “Another variant on this theme is that under divided government spending is constrained, as the parties will generally not agree on spending priorities. As a result, spending is low, tax receipts pile up and surpluses abound.”
But going beyond the 1990s to look at a century’s worth of data suggests that stocks have actually done better when one party has held both Congress and the White House. So whether Romney or Obama win the White House, it might be more important to see what happens to Congress come Election Day. If the election results in divided government – as appears likely – successfully tackling those issues would likely be more difficult, Koesterich writes. And if Wall Street is looking for progress on the tough economic and fiscal policy choices the country faces, it may yet be disappointed – again – by the results of all its campaign spending.