Billionaire real estate executive Barry Sternlicht predicts that the seemingly endless bull-run stock market would suffer from a Democratic sweep in upcoming elections.
“Maybe long term, two, three years out the Democratic sweep would be OK but short term, with the change in capital gains taxes, I think you’d see a pretty significant correction in high flying stocks in November, whenever they announce the winner,” he said at the Delivering Alpha conference presented by CNBC and Institutional Investor.
“Assuming there is a clear favorite from the actual vote, forget about the mail-in vote, I’d expect you’d see some selling in the tech stocks, which have risen so far, because of the significant, huge proposed change in capital gains taxes,” said Sternlicht.
“I think short term it’s going to be bad for the equity markets,” said the co-founder, chairman, and CEO of Starwood Capital Group, an investment fund with over $60 billion in assets under management.
Sternlicht implied he is voting for Democrat Joe Biden but said the former vice president is “not strong on the economy.”
Meanwhile, Goldman Sachs Group Inc. recently said that traders should temper their fears that a delayed U.S. election result could upend markets.
While a delayed outcome is a “tail risk,” a combination of early results, voter turnout, county-level data and the high correlation of polling errors across states suggests investors will have enough information on election night to determine the likely victor, wrote economists Michael Cahill and Alec Phillips in a recent note.
A number of states -- including some key battlegrounds -- allow votes to be processed and counted well before election day, they noted, Bloomberg reported.
“It seems fairly likely that there should be enough information on election night from states that will report results quickly for the market to be able to gauge the likely winner,” the pair wrote. “In other words, the S&P can trade the likely outcome, even if the AP does not call the race.”
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