Democratic Debate: Economic Policies & Impact on Stocks

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Last night, the first Democratic presidential debate witnessed the face-off of seasoned politicians like ex-Secretary of State Hillary Rodham Clinton and her closest competitor, Vermont Senator Bernie Sanders, among others. The ensuing debate provided a glimpse of their economic policies and viewpoints in the run-up to the presidential campaign through arguments and counter-arguments.

While the debate served as a precursor to the likely changes in the framework of the government policies, it also served as a broader hint to the impending changes in the financial markets as a whole and the stock market in particular. Investors across the globe have already started to weigh the pros and cons from the high-octane political rendezvous. Let us also have a closer look at the broad takeaways from the debate.

Pulling Back the Strings of Wall Street

While Clinton has mostly followed the center-left stance presently articulated by President Obama, her upstart challenger Sanders - a self-proclaimed "Democratic Socialist" - is far aligned to the left. The economic views of the other three Democratic candidates, namely Martin O'Malley, Jim Webb and Lincoln Chafee, generally fall between Clinton and Sanders.

In order to cushion the economy from intense market volatility, Clinton has pledged to strengthen the Volcker Rule to deter banks from making certain types of speculative investments that largely contributed to the Great Recession. At the same time, she voiced her concerns regarding the "too big to fail" theory and even proposed to impose a "risk fee" for banks with over $50 billion in assets to curb the risk-taking spree to prevent any recurrence of the 2008 financial crisis.

This in turn could hit the profitability of large banks such as Citigroup Inc. C , JPMorgan Chase & Co. JPM and Bank of America Corp. BAC . With additional controls around leverage and incremental costs, these banks could eventually lose their business to smaller counterparts like Virtu Financial, Inc. VIRT and KCG Holdings, Inc. KCG .

While Sanders largely agreed with Clinton on this front, his views were more focused on reducing the size and political influence of the biggest banks. He favored reinstating the Glass-Steagall Act, which prohibited commercial banks from participating in the investment banking business.

Higher Minimum Wage

While Clinton advocated raising the minimum wage ceiling to $12 an hour from its current level of $7.25, Sanders wanted to raise it further to $15. Although the purported move is likely to alleviate the overall economic well being of the masses, it is anticipated to be counter-productive as some consumer firms intend to pass it to the consumers by increasing their product prices.

Quick-service restaurant operator Dunkin' Brands Group, Inc. DNKN was one such casualty as it reported lower sales due to higher menu prices following a contentious summer of minimum wage discussions in the country. This could be an omen for other franchisee-led fast-food restaurants such as McDonald's Corp. MCD , The Wendy's Co. WEN , Buffalo Wild Wings Inc. BWLD and Restaurant Brands International Inc. QSR .

Healthcare Plans

Sanders propagated the single-payer healthcare plan and intended to transform the existing healthcare system of the country. He proposed to reduce the prices of drugs by introducing tough laws that bring innovation for public consumption to the core of research rather than private profits. This could reduce the profit margins of big pharmaceutical companies like Pfizer Inc. PFE and Merck & Co. Inc. MRK .

On the other hand, Clinton would strive to improve the existing healthcare plan by lowering out-of-pocket expenses such as deductibles and co-pays, which have soared in recent years. She also proposed to bring the on-demand employees or the so-called 'gig economy' under the purview of healthcare benefit plans and workplace protections to improve their social and physical well-being.

The Undisputed Winner of the Debate

The first of the six debates slated for the presidential campaign for the Democrats highlighted the policy differences between the five Democratic candidates, although it was Sanders and Clinton that gained prominence. However, with her dignified poise and calm composure that echoed the unrivalled experience of a candidate at the helm in the upper echelons of the government, Clinton emerged as the party's clear frontrunner.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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