On The Presidential Candidates

I was asked a couple of times over the weekend where I thought the Presidential candidates stand in the race and how the market might react to each.  I thought about it a bit and decided to share those ponderings this morning.  Before we get into that though I'll point out that I am in no way endorsing any candidate but trying to assess the probability of any of them becoming President.  My own philosophy is irrelevant to the business of investing.  Also when thinking about the markets, understand that investors hate uncertainty and that could spill over into how markets trade later in the year depending on who makes the final cut on the Republican and Democratic sides. With that being said here's my short assessment of each.

Democratic contenders:

Bernie Sanders:  I would say the probability that Mr. Sanders can win the Democratic nomination is less than 10%  He can delay Hillary Clinton's process of locking up the delegates and he is forcing her to the left.  However, she has all of the Democratic Party super delegates and most of the Democratic establishment in her corner.  His one possibility for winning I suppose would be if Mrs. Clinton is in deeper trouble with the government over the emails on her private server than we currently know or she all of a sudden has a health issue.  Even in those instances, I believe the Democratic establishment would view Mr. Sanders as too far to the left for the middle of the road Americans that will ultimately decide the general election.  In that event I think the party would possibly look at somebody like Vice-President Biden.  That being said a Sanders nomination would be deeply troubling to Wall Street and would likely impact markets in the months leading up to the election, especially if the investment world starts to worry that he could win.

Hillary Clinton:  Highest probability of winning her party's nomination.  Very high probability of being elected President.  Markets have already discounted much of this and have already discounted the impact of a 2nd Clinton Presidency on the financial system.  Wall Street expects and would likely get a status quo President out of her in regards to the issues that concerns it.

Republican Contenders:

Donald Trump:  Is viewed as dangerous by the Washington and financial establishment.  I think that the Republican Party will destroy itself at the Presidential level this cycle before it allows Mr. Trump to be it's nominee.  Mr. Trump would likely not fare well in the general election against Mrs. Clinton. {We will use her the rest of the way as the Republican nominee because in my book she is the presumptive Democratic nominee.} We also cannot discount the possibility that Mr. Trump would run as a 3rd party candidate.  If he does this then it would virtually assure a Clinton Presidency.

Ted Cruz:  Deeply disliked by the Washington establishment.  Not sure what the financial world thinks of him.  Less than 50% probability of getting Republican nomination.  Low probability of winning versus Mrs. Clinton.

Marco Rubio:  Former Washington establishment favorite after Jeb Bush dropped out of the race.  Right now Mr. Rubio must win in Florida on Tuesday.  If he does not then the race is likely over for him.  Would be considered market friendly if he somehow wins the Republican nomination.  Would likely lose a close race to Mrs. Clinton by our analysis but it could depend on who he chooses for a running mate.

John Kasich:  Current Washington establishment favorite as the betting is shifting from Rubio to him.  Has the least amount of delegates and would need a brokered Republican convention to emerge as his party's nominee.  Is seen as the most moderate Republican in the field and would probably be friendly to the financial community as well.  Mr. Kasich, however,  has the potential to fare the best against Mrs. Clinton in the November general election.

There at this point now exists a very high probability that the Republican convention to be held this summer in Cleveland will be contested.  That throws open the possibility that another candidate like Mr. Romney could emerge at the last moment and potentially wrest the nomination away from any of the four listed above.  Markets could become more volatile depending on who would emerges from this process  in Cleveland but that remains to be seen.  The Republican ticket with the highest probability of defeating Mrs. Clinton in the November elections seems to be a ticket with the combination of Mr. Kasich and Mr. Rubio.  However, it remains to be seen whether the two could ever unite after such a long and contentious primary season.  It could be helped by the fact that neither has spent much time attacking the other.  In the event one of these two is not on the ticket then Gov. Nikki Haley of South Carolina could add heft to the race.

We shall see.  Back Wednesday.