Markets by Trading view

‘Mapping uncertainty’ Is Kenneth Griffin Banking on Trump?


Back in 2018 Kenneth Griffin of Citadel donated a total of $19,225,125 to the Republican cause, however, how much of this was because he was banking on Trump is hard to say. But compared to the $123 million the Adelsons gave the Republicans in 2018, it might seem a bit small. But then the Adelsons are heavily involved in the Casino industry, not quite the same as the Banking industry.

Since March this year many things haven’t been ‘normal’, but Trump speaking to business leaders might be something we are more used to. Indeed, back in March, Kenneth Griffin amongst others took part in a conference call with Donald Trump, not someone he has traditionally been seen to support. It would be one of several situations where Trump would be reaching out to leading figures in the world of investment banking throughout 2020.

The Institute for Policy Studies reported that during the 2018 election cycle billionaires gave $611 million towards political campaigns, up from $17 million in 2008. Why? The study suggests that the growth occurred due to the 2010 Citizens United Supreme Court decision, which allowed companies and outside groups to make UNLIMITED donations.

In 2020 so far the latest number we could find from the Center for Responsive Politics from July was $83 million. This money had been used to fund Trump and Biden’s election campaigns, just from the financial services sector. It has dropped as a proportion of total donations though, from 14% to 9% since 2016.

Reuters reported that this story from back in 2016 may have played a greater part in the drop in influence of Wall Street on Washington:

Hilary was allegedly paid over $600,000 for her Goldman Sachs speech

Still, a lot of party donations come from Hedge Funds and other key financial institutions.  While Biden seems to be less partial to the rich than perhaps Hilary Clinton was 4 years ago, George Soros amongst others remains a staunch financial supporter of the Democrats.

Griffin and his wife had many years ago donated $1.55 million to a political action committee supporting Mitt Romney, then the Republican presidential nominee.

Since 2016 though, Griffin has contributed a further $6 million to the GOP’s House minority leader, Rep. Jim Durkin (R-Burr Ridge), hoping to elect more Republicans to the state legislature. He has also attacked Illinois Democrats for unchecked spending and political corruption in September.

A lot of this seems to have something to do with Taxes. One of Trump’s reported successes has been that he lowered the corporate tax rate in the US from 35% to 21%. Biden in the meantime is looking to raise this back up to 28%, not something a lot of business owners and shareholders will be keen to see him do. With a Democrat majority in the Senate as well as having a Democrat President, US businesses would seemingly need to fork out an extra $1 trillion in taxes.

‘Taxes would be the “most direct consequence of a Democratic sweep” for profits of companies listed on America’s benchmark S&P 500’, according to Goldman Sachs which estimates that if all of Biden’s tax proposals were implemented, it would reduce S&P 500 earnings by 9%”

There appears to be mixed feelings amongst business leaders and owners about the tax implications though.

In fact, a UBS survey from a few months ago said that 53% of business owners supported Trump. A few weeks later a Yale report showed that 77% of business leaders would be voting for Joe Biden. Only one thing is for sure, the country is clearly divided.

Some have gone further, taking to Twitter to make sure everyone knows who they are backing:

The markets will prefer lower taxes, and more incentives to do business within the US. This would mean that the markets would like the Republicans to try and maintain some control over the Senate. A few weeks ago the Washington Post gave Trump a 10% chance of winning, whilst also highlighting another interesting point: That Democrats were far more likely to vote by mail than Republicans, who prefer to vote in person on Election Day, meaning a nail-biting end to the week and no clear result on Wednesday night.

At a Robin Hood Foundation event last week Griffin shared that the impact of this week’s election on markets would be determined by the size of a Democratic takeover of the Senate, with a “blue tidal wave” presenting a problem.

Coincidently, Griffin’s Citadel also reportedly made vast sums from trading apps like Robinhood so far this year (#DisruptionBanking covered a story about Robinhood back in August). In a way, this has helped Griffin become the fourth-biggest individual GOP donor for the period, according to with $46 million being given to the Republican cause so far. A significant increase since 2018 and on what he spent supporting Mitt Romney.

But back to the Election for a moment, and some last minute predictions from Nate Silver from FiveThirtyEight below.

One should always find time to learn about US Geography. States like Wisconsin, Michigan and Pennsylvania will have large impacts on the election results, and it’s not the first time that Trump has surprised us:

Either way the markets will continue their jitters most likely into the early part of next week, with a Biden result potentially decreasing market sentiment just as the pandemic starts to bite again. You may not like Trump, but the global economy seems like it might prefer a Trump or at least a Republican Senate victory.

#FiveThirtyEight #Trump #Biden #Citadel #Tax #Senate #RobinHood #USElections #CorporateTaxRate

Author: Andy Samu

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