Art Cashin, the best source for opinion on the NYSE floor, opined yesterday that 200-300 points of the DJIA decline was because of Sen. Sanders' health issues. Apparently the logic goes that if Sanders were out of the race, Warren chances would improve. She is the candidate, rightly or wrongly, most feared by Wall Street.
I am working on an odds calculation based upon the concept of a parlay. Parlays require a number of events to occur. There are sources and charts for all of these points, which I'll include this weekend. I am trying to give a timely overview for our readers.
* Trump is the GOP nominee (now down to 70% or so)
* Warren becomes the Dem nominee -- now up to 50-50 or so.
* Dems reach 60 votes in the Senate (to block) filibusters -- very remote.
* Something like Medicare for all gets enough traction to become law, despite the Senate obstacles.
Wall Street and news outlets rush in their reactions. It is crazy to forecast policy results from a very uncertain election. That said, the Street's strong GOP bias predicted a market disaster from the Obama Presidency as well as a Trump Presidency. Not a very good record.
The implication is that there may be a market reaction based on Warren odds, but the actual impact on policy, the economy, and earnings is much less than many suspect. In general, the US political system is very conservative, resisting major changes. This is especially true when new legislation is required. Perhaps the most remarkable feature of the Trump presidency is the expansion of Presidential power, unchallenged by Congress. This has happened because the significant changes involved Executive Orders, often testing the legal limits. Policies requiring new initiatives have been less successful.