The GOP convention just unleashed its first surprise aimed at the stock market: Donald Trump desires to curb the influence of big banks. It seems that many more surprises are in store from the Cleveland convention.
Wall Street prepares
Wall Street is also getting prepared for a slew of reports of earnings from a large number of companies, including Goldman Sachs. Many strategists are eagerly waiting for the time when the Republican convention will lift the fog on Trump's policy positions.
It came as a shock to observers that one proposal from the Republican platform is the reinstatement of Glass-Steagall Act. This banking separation rule was chucked out during the Bill Clinton era post a bipartisan effort aimed towards overturning this act. A campaign manager for Trump told the assembled media that the reinstatement of this rule will be a part of the platform. The Republican party will set up walls between businesses of big banks. It will also try to avoid the crisis similar to the one which happened in 2008.
Influence on big banks
According to Dan Clifton, who heads Strategas policy research, the breakage of investment and commercial banking will considerably influence big investment banks and banks. It is the direction towards which Donald Trump will go if he wins the presidency. He says, that other than this, the platform consists of traditional Republican positions, like the promotion of fossil fuels. It also includes taking a harder line on defense and security. There is also the mention of stimulative tax proposals.
Clifton said that the platform on an empirical level is similar to standard Republican sectors, excluding banking. The Federal Reserve is also under its lens. He contrasts the Republican view with the one taken by Democrat Hillary Clinton. The Democratic presidential nominee has proposed transaction taxes to be levied on Wall Street. He added that two minds make up the market and the post-Brexit rally is due to the fact that it is clear that policy makers all over the world will gob for the fiscal polict regardless of who is elected. There is also the popularism issue.
If one sifts through stock market history, it is apparent that Republican Conventions are an excellent time for stocks. The Standard & Poor was nearly up by two-thirds when GOP conventions took place and then about 53 percent during the week post convention.