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Wall Street Renews Scrutiny of Biden’s Policies After New Wins

Biden Policies to Get Fresh Wall Street Scrutiny After New Wins

(Bloomberg) -- With Joe Biden continuing to gather strength, his policies on issues from banking regulations to gun control will get fresh scrutiny from investors who’ve so far been comforted by the assumption he’s a moderate, analysts said after the former vice president’s string of primary victories on “Mini Tuesday.”

The $19 billion Health Care Select Sector SPDR Fund (ticker XLV) fell as much as 3.3% on Wednesday, less than the broad market decline. The health sector has been volatile as Bernie Sanders’ prospects have shifted. Health insurers came under pressure as the Vermont senator ran on a platform of Medicare for All, a single-payer system which would do away with private insurance markets.

Wall Street Renews Scrutiny of Biden’s Policies After New Wins

Investors were rattled on Wednesday after the Trump administration failed to offer a comprehensive fiscal plan for handling the coronavirus outbreak. Goldman slashed its S&P 500 forecast, calling an end to the bull market, and separately said the equity market is overly complacent about the possible damage from the coronavirus. Analysts are keeping a close eye on the virus’s economic impact for signals about President Trump’s chances for re-election in November.

Wall Street Renews Scrutiny of Biden’s Policies After New Wins

Here’s a sample of the latest commentary:

Pangaea Policy, Terry Haines

Biden’s wins are “market positive in the short and medium term because they solidify the comforting narrative that the Democratic general election candidate will be a relative centrist and known quantity, not ‘democratic socialist’ Sanders,” Haines wrote.

However, Biden likely “becomes a market negative in the medium- to long-term because of increasing market unease about the ‘Biden Trojan Horse’ candidacy, particularly when coronavirus-related market concerns become assimilated or fade and more market attention returns to U.S. politics,” he said. Haines flagged “progressive-centrist disconnects” across the board, including on financial services, gun control and energy policies.

He also sees “meaningful general election implications” from Trump’s coronavirus stimulus efforts. If “congressional Democrats are unable to support many kinds of economic relief, including to energy producers, it is very likely to have materially negative effects on how the likely Biden ticket is viewed in swing states this fall.”

Read more: Coronavirus Fiscal Policy Response Isn’t Off the Table, KBW Says

Haines gave Biden a 75% chance of winning the nomination outright, and sees Trump as a 60/40 general election favorite, adding that the “is Biden up to it?” narrative is taking hold and bolstering Trump’s chances.

Raymond James, Ed Mills

“Most of the immediate market impact of a Biden nomination was seen last Monday,” after his win in South Carolina, and following Super Tuesday, Mills wrote in a note. Now, “potential policy proposals of a Biden presidency will get more attention.”

Mills added that the “medical, economic and market outcome of Covid-19 will be a significant factor in the 2020 election.” If the situation deteriorates, he sees better chances for Biden and a greater probability of an all-Democratic government. On the other hand, “should Covid-19 avoid the worse-case scenarios/the economy and market have a significant second-half recovery, the momentum is likely to swing back towards Trump.”

Bernstein, Lance Wilkes

Given Biden’s push to expand Obamacare rather than move to a single-payer system, his wins are positive for managed care and hospitals and “should reduce the uncertainty discount applied to the sector.”

Health insurers focused on Medicaid and individual insurance, like Centene Corp. and Anthem Inc., may benefit the most. Centene fell as much as 4.3% Wednesday, while Anthem lost as much as 2.9%.

Cantor, Steven Halper

Buy the weakness in health insurers as chances of a single-payer system got even slimmer.

The sector is being tamped down by “overdone” fears on the spread of the coronavirus, but “valuation levels of managed care stocks should increase as the likelihood of Mr. Biden’s nomination increases.”

Cowen, Chris Krueger

The next scheduled catalysts are a debate on Sunday and four big primaries on Tuesday in Arizona, Florida, Illinois and Ohio, Krueger wrote. “Biden should run the table by huge margins in these states, when it will basically be over,” he said.

(Disclaimer: Michael Bloomberg, the founder and majority owner of Bloomberg LP, also sought the Democratic presidential nomination. He endorsed Joe Biden on March 4.)

To contact the reporters on this story: Felice Maranz in New York at fmaranz@bloomberg.net;Cristin Flanagan in New York at cflanagan1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Kristine Owram, Scott Schnipper

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