While this year’s political drama will climax — and end — with whom the country chooses as its next President on November 8, the near-term nail biter — if we want to call it that — is whom each nominee will select as their running mate prior to the party conventions. Donald Trump has announced that his selection will be announced late Friday morning in Manhattan.
This may seem impertinent to financial markets, but investors do care about the political makeup of Washington — especially the executive branch — since candidate platform and idealogical leaning are perceived as having sizable potential influence on corporate earnings and global economics during their 4 year term.
Republicans are generally stereotyped as being pro-business and therefore pro-investor, while Democrats tend to be viewed less favorably toward business bottom lines. Of course if we look at stock market performance over the past few Presidential cycles, there was more upside during Bill Clinton’s 8 years in office than there was during George Bush II’s 8 years.
The Speculation on Trump’s VP
Pundits have zeroed in on three candidates as the likely choice for Trump: former Speaker of the House Newt Gingrich, New Jersey Governor Chris Christie, and Indiana Governor Mike Pence.
Since the Republican party has become divided over Trump’s presumptive nomination, conventional wisdom might say he needs to appeal to “the base.” This would probably be best served by picking Gingrich, a hardline personality who social conservatives would be happy to see on the ticket.
Christie is a somewhat popular Governor in a state that has leaned strongly Democratic in recent Presidential elections. But Christie did extremely poorly in his own short-lived White House campaign. His stock seemed to plummet with his puppy-dog admiration and endorsement of Trump. National appeal for him seems lukewarm, at best.
Pence by far is the least known possibility, which probably can be viewed as a good or bad thing. It’s hard not to refer back 8 years and recall John McCain’s selection of totally unknown Alaska Governor Sarah Palin as his co-pilot. Her inexperience and seeming lack of broad policy knowledge combined with her “rogue” campaign actions proved disastrous for McCain. Still, even a more conventional choice probably would not have led to victory.
Pence represents a solid GOP state, which would be reason not to pick him. However, Pence might help with Ohio, a moderate, blue collar, MIdwest state that has proven critical in terms of an electoral win.
While it’s possible he goes with someone that the media has not honed in on yet, the lack of broad endorsement of Trump by party mainstays would seem to limit a competent list of choices.
How Much Does Trump’s VP Choice Matter?
Once he announces his decision, the market will likely assess two things. One, does the selection increase his likelihood of winning in November (which seems like a long shot at the moment). Two, what does the blended look of the ticket offer in terms of support for American and global business.
Unless he picks someone off the radar, I doubt there will be much immediate reaction form Wall Street. If he does go with a relative unknown or someone with a deemed radically pro- or negative business pedigree, we might see something a bit more choppy from traders tomorrow.
Truth of the matter is that investors need not only be concerned with who resides at 1600 Pennsylvania Avenue come January 2017, but with the makeup of Congress next year. Dividend government, as we’ve so often seen through the years, has brought about gridlock in Washington, and relative lack of legislative and arguably economic progress.
Trump’s Best Bet
Like John McCain 8 years ago, Trump may be thinking he needs to take a risk to win in November. A female might be wise given his terrible gender polling. Someone from a state that would be a pickup from Mitt Romney might also be wise. Trump will need to not only win states that Romney carried four years ago, but win a handful states like Florida, Ohio, Wisconsin, Iowa, and New Mexico which went Obama in 2012.
Above all else, he’ll need to pick someone that balances his unconventional ways, since it’s apparent that the country is at best unsure about what a Trump presidency might actually bring. Of course Hillary Clinton isn’t exactly popular in her own right.
At the end of the day, it probably won’t matter who Trump picks if the country thinks it’s time to elect its first female chief executive.
If I were him, I’d probably go with Pence or a long shot like Iowa Senator Joni Ernst. Christie would be better than Gingrich, since he’d appeal more to middle, Main Street America, which is still where national elections are won and lost.