As US stocks have powered to fresh all-time highs, the health-care sector has emerged as a pariah for investors, as burgeoning support for ‘Medicare for All’ among the Democratic contenders for 2020 – part of an overall shift to the far-left for the party as a whole – has caused panic to set it.
All it took was a few formerly moderate candidates like Kamala Harris to follow Sanders’ lead and embrace Medicare for All, and holders of managed-care stocks were stuck with a $300 billion loss.
But while the price action in health-care has left thousands of investors frustrated, it’s just one harbinger of what could happen to the market depending on the outcome of the Democratic Primary, according to a Bloomberg piece published Sunday.
The increasing hostility to Wall Street and corporate America from candidates like Bernie Sanders and Elizabeth Warren, as well as what has become a bipartisan push to curb share buybacks (which would threaten corporations’ position as a crucial marginal buyer powering the decade-long bull market), threatens to spoil the stock-market party inspired by the Trump Administration, which has established itself as the single most market-friendly administration in recent memory. Ultimately, whether any of this legislation passes is irrelevant: A surging tide of support for these ‘progressive’ policies would likely be more than enough to send equities deep into the red.
There has even been some talk of banning buybacks altogether, something that Goldman warned last month could tank the entire market.
And it could all happen sooner than many investors believe possible.
"Most people think that they don’t have to worry about it today," Ryan Primmer, head of investment solutions at UBS Asset Management, said in an interview. "But we can just look at what’s happened with health care as an indication that you don’t know when it’s going to come."
The market’s growing unease was evidence in Stephen Schwarzman’s comments Monday at the Milken Institute conference in Los Angeles this past week where he warned that the Democratic candidates and their policies threatened to slow the economic expansion, particularly by pushing for a rollback of tax reform.
Few presidents have aligned themselves with markets as closely as Trump, who cheers records in the Dow Jones Industrial Average and browbeat Federal Reserve Chairman Jay Powell for raising rates. His sweeping overhaul of corporate taxes capped a 35 percent rally in the S&P 500. Not everything has helped, but the image of a Republican-controlled government united in the cause of stocks was one many investors had begun to savor.
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