Why does the stock market rise and fall with Hillary Clinton's polls? Why don't investors identify better with Donald Trump? asks James M. Meyer, chief investment officer at $1 billion-asset Tower Bridge Advisors in West Conshohocken, in a note today to clients of Boenning & Scattergood.
"But with that said, Mrs. Clinton is experienced, stable and a known quantity. Mr. Trump (is) a larger-than-life populist persona, inexperienced and quite rough around the edges.
"His supporters find his bravado and exaggerations appealing and a gateway, somehow, to a better life than the treadmill they have been on for well over a decade."
It's not Trump's headline positions that boost his supporters, Meyer says. Most are smart enough not "to take him literally. He isn't going to build a wall at Mexico's expense and he isn't going to deport 11 million illegal immigrants. Nor is he going to get a 15% corporate tax rate passed (down from current 39.1% top, or 27% average). He isn't going to discard ObamaCare or NAFTA...
"What he might do, at least this is what his supporters hope, is move the needle in the right direction and make America a better place to live. That's his root appeal...
"Substance doesn't seem to matter. Mr. Trump is brash, often politically incorrect, and self-centered/confident... To some that is his appeal...
"None of this is why Wall Street fears a Trump win... What little substance he has proposed, like tax cuts and less regulation, should play well on the Street.
"What Wall Street fears most is uncertainty. And Trump defines
uncertainty with a capital U.
"Is he going to renegotiate trade pacts to our advantage? Or is he going to precipitate a huge trade war?
"Can he get Putin and Kim Jung Un to back down? Or are we headed for Armageddon?
"Is he going to improve the plight of inner city America, or create further polarization?
"How is he going to slow the steady growth in (Medicare, Medicaid, Social Security spending?)
"Who will be his economic masterminds? It doesn't sound like he and Fed Chief Janet Yellen are likely to get along for very long.
"I have no answers to these questions and neither does anyone else. That probably includes Donald Trump.
"What we do know, and saw clearly in the debate, is that Trump can be baited and he takes the bait almost every time.
"Simply said, Mr. Trump likes to talk about himself. If he can shift the conversation to Mrs. Clinton, he might win given all the negativity surrounding her...
"He might still win.... His base is more energized... The country is very polarized..."
But on Wall Street, based on the way the market has moved lately, "a Clinton win would probably generate a modest and short-lived relief stock market rally. After all, she isn't for a whole lot of change," especially if Republicans keep control in Congress.
"However, should Mr. Trump win, I think markets worldwide would (fall, due to) massive short term uncertainty... It will take some time for the uncertainty to disappear."
(Ironically, given Trump's suspicion of Mexican immigrants) Meyer compares Trump to Latin-style populist candidates: At best, Trump could prove a "better than expected" populist President, like left-wing Lula de Silva in Brazil in the 2000s.
But more often, Meyer reminds us, "those elected on sheer personality with little substance behind them generally lead to poor outcomes. Chavez in Venezuela... comes immediately to mind...
"We didn't learn a lot about either candidate on Monday that we didn't already know. But what was confirmed is that the level of uncertainty with a Trump victory is much higher than the level of uncertainty with a Clinton win.
"Wall Street hates uncertainty."