The smart money on Wall Street bet on Jeb Bush, Scott Walker and Marco Rubio to be the Republican nominee in the 2016 presidential election -- and came up empty. A month ago, it looked like the best bet for Wall Streeters hoping to back a candidate might be Democrat Hillary Clinton.
But now, Donald Trump seems to be evolving his way into Wall Street’s favor. He recently hired a former Goldman Sachs banker to head his fundraising effort, including outreach to billionaire hedge-fund managers. Trump formalized a plan with the Republican National Committee to raise large sums from donors able to write six-figure checks, and he appears ready to reverse an earlier pledge and accept support from super PACs able to corral millions in funding from rich donors.
His views toward Wall Street seem to be changing at the same time he’s hearing out wealthy Wall Street donors. Trump recently said that dismantling the Dodd-Frank banking reforms put in place after the 2008 financial crash would be one of his top priorities as president. That’s manna for bankers: Those rules were supposed to reduce risk in the banking system and prevent the need for future bailouts, but bank honchos complain they’ve slashed lending and profitability. And after saying he’d likely get rid of Federal Reserve Chair Janet Yellen, whose dovish bent is generally good for stocks, Trump has now softened his attitude, saying, “I am not the enemy of Janet Yellen.” Those are bullish words for markets.
Though a billionaire businessman, Trump the candidate has unnerved the financial industry with his proposals to kill free-trade deals, remake the Fed, and repay U.S. debt at a discount if there's ever a crisis. He has also argued that hedge fund managers “are getting away with murder” because of loopholes that help lower their tax bills.
Expect friendlier rhetoric from Trump toward the titans of finance from now on. “Donald Trump has dropped his Wall Street bashing and pivoted on key issues,” Gregg Valliere, chief global strategist for Horizon Investments, wrote in a recent note to clients. “So he hates Dodd-Frank? That will win him friends, and contributions, on Wall Street.”
There’s a ton of money at stake, and perhaps the presidency. Trump started out, of course, funding his own campaign, and he has provided about 75% of the $50 million or so his campaign has spent so far, with the other 25% coming from donors giving $2,700 or less. But the general election will cost multiples of what Trump has spent on the primaries, and even Trump doesn’t have the $500 million to $1 billion in ready cash he’ll likely need to compete against Clinton.
That has led to Trump’s newfound willingness to accept millions in outside funding, which is virtually essential for any major candidate these days.
Trump has insisted he can’t be bought by big donors, while railing against the long tradition of politicians doing favors for donors who help them get elected. Voters may now wonder if Trump is changing his M.O. and reversing a core tenet of his campaign – the rejection of conventional political behavior.
Trump has established a cover story for flip-flopping, saying it’s important to remain “flexible” when negotiating deals and explaining that his thinking on some key issues is “evolving.” Voters might buy that, given Trump’s force of personality. Or, they might conclude that Trump is like every other politician, saying whatever necessary to pull in money and appease voters. At least Wall Street has finally found a horse worth betting on.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.