Wall Street Braces For Trump as He Surges Toward the GOP Nomination

Republican presidential front-runner Donald Trump has made his disdain of Wall Street well known. As the Dow Jones Industrial Average tumbled to begin 2016, he pledged to “tax Wall Street” and said investors there have caused “tremendous problems for us.”

“I don’t care about the Wall Street guys,” he said in January, bucking the traditional pro-business line of the GOP. “I’m not taking any of their money.”

As he surges toward the nomination with a string of seven Super Tuesday victories, powerful voices on Wall Street are returning the favor.

Trump “has a kindergartner … view of economics,” Stanley Druckenmiller, the billionaire founder and former chairman of Duquesne Capital, said Wednesday on CNBC. “The man says China is manipulating the currency. China is in the middle of the biggest currency run in history. They’re losing $100 billion a month. They’re intervening every day to hold their currency up.”

“He doesn’t know what he’s talking about,” added Druckenmiller, who supports Ohio Gov. John Kasich for the GOP presidential nomination. “What comes out of his mouth astonishes me.”

Druckenmiller isn’t alone. Across Wall Street, analysts are sounding alarms about the economics of a Trump presidency, and the lack of details that surround his known fiscal policies.

The billionaire businessman has no coherent economic policy in the traditional Republican pro-corporate or Democratic pro-labor sense. He appears to be an economic isolationist in a global economy, vowing to scrap trade deals like the Trans-Pacific Partnership, a pact covering 40 percent of the world’s economy and backed by the U.S. Chamber of Commerce. He says it benefits China, even though Beijing is not a part of it.

Trump also wants to label Beijing a currency manipulator, and end what he characterizes as illegal Chinese export subsidies. He’s called for penalties against companies who move jobs from the U.S. to Mexico, including high tariffs if they want to export back to the United States.

“The trade policies he’s announced look like they might start a trade war,” Gary Hufbauer, an international trade expert at the Peterson Institute for International Economics, told Foreign Policy.

Trump’s tax plan is also causing concern among investors. It would slice into federal revenue by $9.5 trillion over a decade — a 22 percent drop — with no concrete proposal on how to refill the U.S. Treasury. It would also increase the after-tax incomes of the wealthiest households by an average of more than $1.3 million a year, according to the nonpartisan Tax Policy Center.

Money managers are changing the way they invest because of Trump’s rise in the polls.

Reuters reported Wednesday that Phil Orlando, a senior portfolio manager and chief equity strategist at Federated Investors in New York, which manages $351 billion, is reducing equity exposure over fears about Trump. Similarly, Dave Lafferty, chief market strategist at Natixis Global Asset Management, which manages $870 billion in assets, said market volatility would increase as Trump moves closer to securing the nomination. And hedge fund manager Doug Kass of Seabreeze Partners Management Inc. said last week he was shorting U.S. equities, or betting that their price would go down, as Trump continues to surge.

The rise of Trump creates a condition that investors abhor, according to Hufbauer.

“The basic problem is uncertainty. Wall Street doesn’t like uncertainty,” he said.

Photo Credit: Scott Olson/Getty Images