Bernie Sanders is a Greater Risk to Equity Prices Than Coronavirus.

The winning, by Bernie Sanders, of the Nevada Democratic primary in solid fashion, coupled with several other wins, in conjunction with the stunningly bad debate by former mayor Michael Bloomberg, suggests that Bernie Sanders has the momentum to potentially capture the democratic nomination. This would mean that, for the first time in modern American political history, a socialist democrat would be running against a republican.

Bernie Sanders disdain for most aspects of capitalism is hard to miss. His platform consists of taxes on equity transactions, sharply increased corporate taxes, reduced fees by all financial service firms or increased taxes, legislative or executive actioned lowering of drug prices, the elimination of private health care insurers as well as the elimination of the private student loan industry and the private incarceration industry. Bernie Sanders is determined to completely change, through legislation or executive order, 100% of the American economy as expressed by GDP.

The changes envisioned by Mr. Sanders are profit limiting, or profit ELIMINATING for those sectors in question. As publicly traded companies exist for every sector of American GDP, A Bernie Sanders presidency would be devastating for businesses in the United States. Anyone with equities, either directly held, through 401ks, or through pension funds, would be negatively impacted. The flow through impacts on the global economy would be far reaching.

On the face of his manifesto, the damage that could be inflicted on the present American capitalist economy would be so severe that it cannot be contemplated, and until now, it was not contemplated. Independent democrats, moderates and republicans alike completely disavow most of the proposals espoused by Bernie Sanders.

However, the wild card in all of this is the notion of populism. Should Bernie Sanders win the nomination, his mantra is “take from the rich and give to the poor”. He dangles buckets of free stuff, apparently without consequence. His constituents are those who would like free stuff and have only a tenuous grasp of the consequence to the entire American economy.

Should Bernie Sanders capture the democratic nomination, and should his socialist movement continue to gather momentum, there exists some short term pricing risk for equity markets. Should he win the presidency, it is more likely that American equity markets could fall by 50%, or more. The former appears more likely than the latter, at the present.