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The stock market will 'drop pretty heavily' if Elizabeth Warren gets Democratic nomination: Analyst

Earnings season is in full swing with more than 31% of S&P 500 companies reporting quarterly earnings, and 80% of those are beating estimates, according to FactSet. But Cresco Capital Partners managing director Codie Sanchez says one factor — the chance of Senator Elizabeth Warren becoming the Democratic presidential nominee — could upset the positive earnings environment.

“If Warren is put forward as the candidate, I expect the stock market to drop pretty heavily,” Sanchez tells Yahoo Finance’s The Ticker. “Do I think that’s pervasive? No. But I certainly don’t think it would be a bad idea to hedge your risks there.”

This comes as Warren goes after not only the banking and health care industries, but also big energy. The Massachusetts senator is proposing to ban new fossil-fuel leases offshore and on public lands. She has also introduced legislaiton to require public companies to disclose their climate-related risks.

“You have more than 45% of the S&P in the three industries that she is going hardest after,” Sanchez says. “When we’re out on the street talking to other asset allocators and investors like myself, you really can’t front run that risk because there is too much else happening.”

The Bahnsen Group Chief Investment Officer David Bahnsen agrees that a Warren nomination could move markets, but that it is still too early to tell.

It’s a very bad idea for investors to be acting in October of 2019 about something that might happen in December of 2020,” Bahnsen says. “She has a long way to go to win the primary. I think she’s the favorite right now. You can’t make market calls around those things.”

But a new Quinnipiac poll released Thursday shows Warren is a clear frontrunner with a 7-point lead over former Vice President Joe Biden. Twenty-eight percent of Democratic respondents say they would vote for Warren compared to 21% for Biden. Bernie Sanders came in third with 15%.

“The real issue I’d be thinking about is the Senate,” Bahnsen explains. “There’s your hedge. Even if you get an Elizabeth Warren presidency, if the Republicans hold the Senate, all of those things that we’re most worried about — in banking and energy and certainly health care — they’re not going to happen.”

Meghan Fitzgerald is a producer at Yahoo Finance.

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