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Washington vs. Wall Street and the race for 2020

Yahoo Finance Editor-in-Chief Andy Serwer, HuffPost Washington Bureau Chief Amanda Terkel, Yahoo News Editor-in-Chief Dan Klaidman, and AGF Investments Chief U.S. Policy Strategist Greg Valliere discuss the state of Wall Street while the 2020 election approaches.

Video Transcript

- Welcome back. We're now joined by Greg Valliere, who is Chief US Policy Strategist at AGF Investments. Greg, nice to see you.

- Good to see you, my friend.

- So here's a nice question for you. What are the closing arguments from both camps as we head towards November 3 when it comes to the economy?

- Sure. Well, I think the Biden argument will be health care, health care, health care. It'll be Obamacare. Pre-existing conditions. Things like that. Where, clearly, that's the number one issue for women. And I would argue women are the key demographic in the election. For Trump, you know, I think we get a GDP number at the end of this month. It will be very strong. It will just make up for a weak second quarter. But Trump will brag about the economy late in this month. But I think for him, the big argument, if I were advising him, I'm not, would be to talk about the Biden agenda, which relies so much on tax increases. I think that's an area where Trump could draw some blood.

- So I wanted to ask you a little bit about the stimulus bill, or the possibility of one. If nothing happens, you know, in Wall Street's point of view, who is to blame here?

- Well, there's a lot of blame to go around. I think Nancy Pelosi started out with much too ambitious a bill. She seems very unwilling to compromise, even when the number gets closer to hers. But there's blame on Mitch McConnell and the Republicans. The idea that they would accept anything over $1 trillion from Mnuchin and Pelosi, I think, is ludicrous. The Republicans are not going to sign off on a big bill.

- And then, you know, when Trump declared that the negotiations, obviously that changed, Mnuchin is negotiating again, what was the reaction on Wall Street to that? Did you take him seriously, for example?

- It was positive. I mean, Wall Street tends to rally when they think we've got a deal. Tends to sell off when it looks like we don't have a deal. I do think we'll get a deal. I just don't know when. It may not come until the middle of the winter, around inauguration time. I don't think it's going to come before the election. But there are too many really smart people, headed by Jerome Powell, who are in agreement that we really do need another stimulus, or the economy is going to start to really soften.

- Greg, as we're sitting right here talking, Joe Biden has a commanding lead in the polls. A double-digit lead in many polls. And significant leads in virtually all of the battleground states. So pretty good bet right now that he is going to win. If he does, how does Wall Street react? Joe Biden, an undertone of his campaign message has been from the beginning that, elect Joe Biden, it'll be a return to normalcy. Trump is known as being fairly erratic, which the markets don't always like. So how does Wall Street react to a Joe Biden win?

- I think the markets have priced it in. I think the markets can live with Joe Biden. As you say, you know, he's not erratic. He's fairly moderate on a lot of issues. What I don't know, what's harder to figure out, is whether the markets have factored in a blue wave with the Democrats taking the Senate and, obviously, keeping the House and taking the White House. That's something I think the markets could be concerned about. Because it could speed up the timetable for tax increases and some negative stories for certain sectors. Defense, things like that. So, I think, yes, the markets would be happy to see Joe Biden get a stimulus bill enacted. But the markets might not be happy if everything here is controlled by the Democrats.

- Greg, you talked about how health care might be a great talking point for the Democrats. And it seems like they were listening to you. if you were paying attention during the vice presidential debate, you might have heard, of course, that Kamala Harris talked about that. And it was sort of a big moment for her when she was debating Mike Pence. So take a listen.

- And I just-- This is very important, Susan.

- Yes. But we need to give Vice President Pence a chance to respond.

- I'd just like to-- He interrupted me. And I'd like to just finish, please. If you have a pre-existing condition, heart disease, diabetes, breast cancer, they're coming for you. If you love someone who has a pre-existing condition--

- That's nonsense.

- Thank you, Senator Harris.

- --they're coming for you. If you are under the age of 26, on your parents' coverage, they're coming for you.

- So, Greg, you did mention this before. But does this really resonate with the electorate?

- Oh, absolutely. It certainly resonates with female voters. And I think they're the key demographic. You know, there are a lot of differences between now and 2016. Right now, Joe Biden has better numbers with women than Hillary Clinton did. Right now, the Republicans are in money trouble. They're not able to advertise as much as they'd hope because they ran out of money. Right now, I think you've got to say the three key states, Wisconsin, Michigan, and Pennsylvania, are definitely tilting to the Democrats. Those are states that Hillary Clinton lost narrowly. So I see a lot of differences between now and 2016 that would point to-- You know, my gut feeling is that Biden is going to win by 5 points. Maybe 6. And not a landslide. But I think it will be a margin that would not necessitate a disputed legal challenge that could last well into the winter.

- You know, I was just going to ask you about that. So you really sort of envision this thing getting wrapped up by, say, the second or third week of November?

- If it's close, obviously, there's two big threats. I mean, one is we may not know on election night. A lot of states, you're looking at a tidal wave of absentee ballots, may not be able to tell us who won for several days. The other, greater threat, of course, is that if Trump appears to have lost narrowly, he'll contest it. And then he's so litigious, he'll go to William Barr and say, I want you to take this all the way to the Supreme Court. And lest we forget, in the year 2000, it was December 12 before the Supreme Court decided that George W Bush lost to Al Gore. So, yeah. This could drag on for a long while if the election is close. If Biden wins comfortably, then I think that threat diminishes a lot.

- Do you think a potentially drawn-out election result, or one where Trump declares that he won, even though he hasn't yet, what sort of instability do you think that will cause in the markets?

- Well, it could. I mean, markets hate uncertainty, obviously. It could drag on. We could see litigation going on for quite some time. I think, at some point, the Republicans will go to the White House and tell him, just as they told Richard Nixon in 1974, it's time to give it up. I think there will be a consensus in the country that this couldn't continue for a long time. But, again, I think we underestimate Trump at our own peril. And I think he would do quite a lot to retain the office, even if it appears that he didn't win.

- I know that Dan had just said earlier that it looked pretty good for Joe Biden right now. And I think that you wrote a piece, and you just spoke to that a little bit, Greg, about how this is not the same as 2016. But give me the road to victory for Donald Trump? How can he win?

- Well, you know, let's look at 2016. I'm not necessarily a believer that we'll repeat it. But, in 2016, he had a couple of rallies a day. He showed tremendous energy. And I watched him last night. He didn't cough. He looked pretty vigorous. I think he'll outwork Joe Biden. I think he'll make Biden's veer to the left a big, big issue. I think he'll brag about the economy. But, you know, in the final analysis, this is a referendum on Trump and his handling of the virus. And based on that, he's in real trouble.

- Interesting. All right. Greg Valliere, thank you so much for joining us. Really appreciate it.

- All right. Good to see you. Yeah. So long.