Kamala Harris's Emerging Popularity Among Wall Street Figures
Since the swift entrance of her presidential campaign, following President Joe Biden's withdrawal from the race in July, Harris has gained support from notable figures in the Wall Street community.
At times, there was tension between big businesses and Biden, whose administrations frequently accused corporations of greed, contributing to the inflation crisis. However, Harris' alliance with Wall Street, despite supporting Biden's policies, was not a guarantee.
Jeffrey Sonnenfeld, founder and president of the Yale Chief Executive Leadership Institute, told CNN that Harris has a stronger relationship with Wall Street than Biden did, commenting during a phone conversation on a Tuesday.
Harris' stance towards Corporate America and Wall Street is relatively uncharted terrain compared to Biden's. However, as California's attorney general and senator, she had a more welcoming approach than Biden towards Silicon Valley, home to America's prominent corporations. As a result, prominent Wall Street figures are generously contributing to her campaign, offering her a substantial financial boost from an industry traditionally favoring Republican candidates.
At the Democratic National Convention, former American Express CEO Ken Chenault strongly endorsed Harris, distinguishing her from Donald Trump, who she opposes.
“She understands that a market-based economy requires a strong and effective government. Kamala Harris is aware that turning good ideas into thriving companies requires help and that creating good-paying jobs can be achieved by aiding manufacturers in their expansion,” Chenault said. “Harris recognizes that creating an advanced economy is not done through extensive tariffs that increase costs and harm consumers and businesses, resulting in job losses.”
Even before revealing her campaign's specific policies, Roger Altman, founder and senior chairman of Evercore, expressed his support for Harris, anticipating her campaign's impressive funding.
Blackstone president Jonathan Gray contributed $413,000 to the Harris Action Fund at the end of July, according to a source familiar with his contributions. In June, Gray donated $56,600 to the Harris Action Fund and Harris for President, according to Federal Election Commission data.
Alex Soros, son of liberal billionaire George Soros, endorsed Harris last month, with George Soros also supporting her campaign, his spokesperson informed CNN. Avenue Capital Group CEO Marc Lasry donated $100,000 to the Harris Action Fund in March, as per Federal Election Commission data.
Sonnenfeld explained that Harris' stronger relationship with Wall Street compared to Biden's is due to her moderating her "class warfare" rhetoric and establishing a track record of fairness towards businesses as California's attorney general, despite not always favoring them excessively.
“She confronted misconduct, not viewing thriving businesses as misconduct themselves. She understands that flourishing businesses are good for the economy and the average American worker,” Sonnenfeld stated.
However, some Wall Street heavyweights have openly supported Trump. Bill Ackman, billionaire hedge fund manager and CEO of Pershing Square Capital Management, endorsed Trump in a July post. Blackstone CEO Stephen Schwarzman stated his backing of Trump's reelection bid in March. Key Square Group founder Scott Bessent is a Trump supporter and attended his rally in Asheville, North Carolina.
Policies and Positions
Burns McKinney, NFJ Investment Group's managing director, believes that some investors might prefer Trump's tax cut and tariff proposals over Harris' populist economic policies, as they could drive economic growth.
However, such tax cuts might lead to higher deficits, and corporations may transfer the tariff expenses to consumers by increasing prices, resulting in inflated prices, an issue that lately concerned Wall Street.
Annual inflation peaked at 9% in June 2022, following the Federal Reserve's aggressive interest rate hikes exceeding two years from near-zero levels during the pandemic. In contrast, last month, inflation fell below 3%, renewing optimism among traders that the central bank could curb inflation without inducing a recession.
Harris' policies could also increase inflation. Her proposed policies, focusing on making expenses like housing, groceries, and childcare more affordable, chiefly through offering tax relief for middle-class and lower-income Americans, as well as combating price gouging, may offer consumers more disposable income, potentially boosting demand for goods and services, consequently raising prices.
Harris' campaign announced on Monday that she intends to raise the corporate tax rate to 28%, from its current 21%, reversing Trump's tax cuts that lowered the corporate income tax rate from 35%. Some investors criticize the proposed tax rate hike, warning that it may negatively impact US companies and constrain the economy.
Obviously, Trump has vowed to impose severe new tariffs on China and all trading partners, triggering a potentially disruptive global trade war. Such actions would spark uncertainty, an emotion investors dislike.
Beyond trade policy, investors anticipate a possible shift in administration style if Trump returns to office. Sonnenfeld highlighted Trump's history of attacking legendary American corporations, such as Harley-Davidson, Delta, and Nike.
“Wall Street is repelled by Trump's unpredictable aggressiveness. Trump's volatility causes turmoil in financial markets,” Sonnenfeld said.
Fed's Independence
Some significant investors also note that the candidates' differing views on the Fed's longstanding independence could be a pivotal factor in their choice of who to support.
Under the leadership of Chairman Jerome Powell, the Fed operates independently as its own administrative body, scrutinized by Congress. Former President Trump, who endeavored to persuade the Fed to reduce interest rates throughout his tenure, mentioned his viewpoint that the president should have direct control over monetary policy. On Monday, he attempted to tone down his past remarks. Harris has pledged to keep her opinion outside of the Fed's decision-making process.
The independence of the Fed is essential to prevent political preferences from interfering with monetary policy. There are concerns among investors that the central bank may lose its credibility, a crucial factor in accomplishing its dual mission of price stability and maximizing employment, if the US president had direct sway over its operations.
Gerald Goldberg, CEO of GYL Financial Synergies, expressed his concerns, stating, "That would be a major issue."
Harris' relationship with the upper echelons of Wall Street has been strained at times, particularly when she served as California's Attorney General and clashed with major banks in the wake of the housing crisis.
Harris withdrew California from negotiations with other state Attorneys General in 2011 to demonstrate that the emerging agreement required tougher penalties for banks. Her actions contributed to a roughly $20 billion settlement for Californians.
Harris has established connections with business leaders, including Lazard President Ray McGuire and Centerview Partners co-founder Blair Effron, and is expected to solicit their advice, reports suggest. In July, Harris participated in a discussion with supporters, hosted by JPMorgan vice chairman Peter Scher, at his residence, according to a company representative from CNN.
Previously, a source disclosed to CNN that Harris had invited JPMorgan Chase CEO Jamie Dimon for lunch at the White House. However, a JPMorgan representative informed CNN that Dimon does not endorse any particular candidate.
CNN's Kayla Tausche and Tami Luhby contributed to this report.
Despite Harris' support for Biden's policies, her alliance with Wall Street has garnered significant financial contributions, indicating a potential shift in corporate investments in politics. Key figures like Jeffrey Sonnenfeld and Ken Chenault have praised Harris' understanding of the importance of a strong government in a market-based economy and her support for businesses that create good-paying jobs.
Investors are closely watching Harris' stance on business and investing, particularly her proposed corporate tax rate hike to 28% and her policies aimed at making essential expenses more affordable for middle-class and lower-income Americans. Such policies could potentially impact inflation and the overall economy, and some investors have expressed concerns about their potential impact on US companies.
