The “unfortunate death” of George Floyd that has “sparked riots” in multiple cities across the country seems to be having “not much of an effect” so far on the political landscape ahead of the November election, according to Jeremy Siegel, professor of finance at Wharton and WisdomTree senior investment strategy advisor.
However, “2020 is not looking like a good year for the U.S.” overall, and the “early read” from the political markets is that Floyd’s death and the ensuing riots may be providing a “slight benefit for the Democrats,” he said Monday, during his weekly conference call on the state of the markets.
Siegel noted that he checked the odds on the political markets just before the call, finding that they gave former Vice President Joe Biden a 53% chance of winning the presidency, while “the Senate is now a dead heat, 50-50,” and the Democrats remain “very strongly” ahead of Republicans and are expected to hold onto the House, with 80-20 odds, he said.
“A sweep by the Democrats would not be favorable for the markets,” Siegel said, adding: “Holding the Senate as Republican would hold off a corporate tax increase.”
That is because, as he said May 18, if the Democrats hold the House and win back the Senate, “my feeling is we’re going to basically repeal and rewrite the corporate tax cut that the Republicans put in place shortly” after Trump took office. He was referring to the sweeping tax overhaul enacted in 2017.
Corporate taxes “would probably go up 10% and that would be a headwind for the stock market going forward, 10 to maybe 15% — it’s too early to tell,” he said Monday.
Meanwhile, federal stimulus efforts including the Coronavirus Aid, Relief and Economic Security Act, are what’s “driving the markets” now, he said.