Markets May Welcome Capitalism-Friendly Buttigieg Presidency, Cowen Says

(Bloomberg) -- Presidential candidate Pete Buttigieg may be well received by markets due to his pragmatic approach to governing and his “appreciation for the benefits of capitalism,” according to Cowen. Buttigieg is due to take the debate stage on Wednesday night as the emerging front-runner in Iowa.

The Indiana mayor is probably one of the better Democratic candidates for financial and housing stocks, analyst Jaret Seiberg wrote in a note. Buttigieg’s “experience is solving problems rather than partisan brawling,” while he hasn’t endorsed “some of the more radical policy plans that other Democrats are advocating,” Seiberg said.

Seiberg noted that though Buttigieg hasn’t articulated many views on financial firms while campaigning, he’s “Harvard and Oxford educated and worked for McKinsey on economic stabilization in war-torn areas.” He also presents himself as a “Democratic Capitalist,” and has touted his business experience. Seiberg pointed as well to national policy adviser Sonal Shah, formerly with Goldman Sachs and Google, who “sounds like another progressive pragmatist.”

Buttigieg is probably likely to pick a Federal Reserve chairman who’s similar to Janet Yellen, Seiberg added, as he may understand the “importance of an independent central bank that can put the long-term interests of economy ahead of short-term political gains.” Buttigieg is unlikely to choose a central banker who endorses modern monetary theory, Seiberg said.

Seiberg highlighted Buttigieg’s known policy views on financials and housing:

• Buttigieg has been vocal about ensuring consumers can sue credit card companies rather than having to use arbitration.
• He would restore corporate tax rates to 35% to pay for his health care plan, which means that higher taxes aren’t a separate priority, reducing risk.
• He has endorsed a transaction tax, possibly aimed at high frequency trading rather than traditional trading.
• He supports higher estate and top individual tax rates.
• Buttigieg may be good for housing as he wants to create a federal program to provide downpayment assistance for 1 million families.
• Buttigieg’s discussion of using affordable housing trust funds to finance two million units of affordable housing may be an “implicit endorsement” of Fannie Mae and Freddie Mac.
• Cowen hasn’t heard Buttigieg discuss bank regulation, noting that the candidate hasn’t weighed in on breaking up banks or objected to plans to reduce reliance on leverage ratios in the Federal Reserve’s stress test.
• Like most of Democratic candidates, Buttigieg favors legalizing cannabis.

U.S. futures fell on Wednesday amid tensions with China. Big banks slipped in pre-market trading, with Bank of America Corp., Citigroup Inc., and JPMorgan Chase and Co. all down about 0.7%.

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Will Daley

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