Warren winning Democratic nomination would be 'one-two punch' for stocks

Wall Street is growing increasingly worried over the prospect of Elizabeth Warren winning the Democratic presidential nomination.

Warren’s popularity has skyrocketed this summer: The Massachusetts senator holds a 2 percentage-point lead over former Vice President Joe Biden in Iowa, according to the latest Des Moines Register/CNN/Mediacom poll, and has also moved ahead of him in New Hampshire, according to a Monouth University poll.

Betting markets show Warren has a 48 percent chance of winning the Democratic nomination, according to electionbettingodds.com. Joe Biden has the second-highest odds at 18 percent.

“Wall Street is not happy about Elizabeth Warren,” Jim Awad, Clearstead senior managing director, told “Making Money with Charles Payne”

Forbes Media Chairman Steve Forbes agreed.

“Elizabeth Warren has to be taken seriously,” he told “Cavuto Coast to Coast” on FOX Business on Monday. “When somebody like her, with her background, says she’s a capitalist, you know that’s the exact opposite of what she has in mind.”

Warren, who incurred Wall Street's ire a decade ago by championing the Consumer Financial Protection Bureau, announced a proposal Monday for a 2 percent annual tax on wealth over $50 million and a 3 percent annual tax on wealth over $1 billion.

The proposal was the latest from the senator to draw the ire of Wall Street. Other such proposals include Medicare-for-all, which Warren has declined to say how she would pay for, leading to speculation she would raise taxes on the middle class too.

“Should she win the nomination, the equity market will start to price in the combination of a fiscal contraction under a Democratic government and less demand for equities from rich investors,” Sebastien Galy, senior macro strategist at Nordea Asset Management, told FOX Business.

"Wealthy clients typically are willing to take more risk and look at long-term investing in a plethora of startups that end up in the Nasdaq and drive much of America's innovation," he said. "The odds are that this one-two punch of a likely fiscal contraction and falling demand for riskier assets is unlikely to go down well."

Galy says the stock market will fall 5 percent to 7 percent if Warren wins the Democratic nomination, with luxury names and pharmaceuticals likely seeing notable selling pressure.

Awad agrees that markets would become more vulnerable if Warren wins the Democratic nomination.

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“If we get to September and she’s the front-runner and builds momentum, it will be more pressure on the markets,” he said.