In addition to potentially producing the country's first female president, the unprecedented 2016 presidential election might also permanently alter politics in the United States, according to Greg Valliere, chief political strategist at Horizon Investments.
Speaking Monday evening in San Diego as part of the opening keynote session at the Schwab Impact conference, Mr. Valliere said he believes the Republican Party could break into two within months after the election. The Democratic Party, he added, will not be far behind as the country moves toward electing what would be the “least popular president ever.”
“The friction is there for two more political parties, and by the next presidential election you literally could have four legitimate parties emerging,” he said. “Things aren't going to calm down after the election; I think we could see even more division as we move into 2020.”
Mr. Valliere believes the divisions in both parties are already taking shape. Among Republicans, he expects a party to emerge from anti-establishment supporters of nominee Donald Trump.
On the Democratic side, Mr. Valliere said the party is being exposed and divided by the flood of leaked emails that show establishment power struggles, corruption and infighting.
“The left is really steamed by the Wikileaks emails, and I think (Sen. Elizabeth) Warren will demand quite a bit,” he said. “You could see lots of fighting between (nominee Hillary) Clinton and Warren.”
Presidential politics isn't usually so high up on the agenda of the Charles Schwab & Corp annual conference, but with the election just two weeks away the audience of more than 4,000 financial professionals gobbled it up.
Contrary to many of the recent polls, Mr. Valliere doesn't believe Mrs. Clinton will win in a landslide, but he does believe she will win a close election.
“There weren't enough old white men to elect Mitt Romney [in 2012], and there sure as hell aren't enough to elect Trump,” he said. “I think Hillary is a very flawed and vulnerable candidate who got lucky enough to face the only candidate in American that she can beat.”
While Mr. Valliere was virtually all about politics, he was preceded on the keynote stage by Schwab's chief global investment strategist Jeffrey Kleintop, and chief investment strategist Liz Ann Sonders. Mr. Kleintop highlighted the “sleeper positive” reality of it now being more than five years since the difficult summer of 2011 for most investments.
“The five-year numbers now look good because we dropped off that horrible summer of 2011 and the debt-ceiling debacle,” he said. “We've gone from 10% trailing 5-year return to 50% 5-year return. As we get past this election, investors might start looking in the rear view mirror and put some money to work. That could be a real positive in the next weeks and coming months.”
Ms. Sonders said she believes the Federal Reserve's historically tight monetary policy is keeping the secular bull market for stocks alive.
However, she added, “In keeping interest rates as low as they have for as long as they have, the Fed has limited it's power.”
One case she cited for a continued run up for stocks is the lack of investor enthusiasm, which she illustrated with a graphic showing flows into passive strategies and out of active strategies.
“Since the financial crisis, there has been no net new money going into the U.S. Markets,” she said. “Typically, bull markets end with maximum euphoria, and I don't think that's happening this time. I think investors are more skiddish, and there are certainly reasons for that.”
Tying the financial markets to the presidential election, Ms. Sonders said, “The least unsettling outcome for the market is a Clinton win, and the House and Senate staying with Republicans.”