A renowned economist breaks down what the Kamala Harris VP pick means for markets

AP Photo/John Bazemore

  • Allison Schrager, a senior fellow at the Manhattan Institute, told CNBC on Wednesday that markets seemed comfortable with Kamala Harris on the ballot and to some degree had already priced in a Joe Biden presidency.
  • Harris last summer proposed a tax on stock and bond trades, but Schrager said she didn’t expect Biden and Harris to make that change if they’re elected.
  • She added that Biden and Harris “aren’t particularly risk-takers as candidates.”
  • The nation could expect higher income taxes and corporate taxes under a Biden-Harris administration, Schrager said.
  • Visit Business Insider’s homepage for more stories.

Allison Schrager, a senior fellow at the Manhattan Institute, told CNBC on Wednesday that Joe Biden’s vice-presidential pick of Kamala Harris was a predictable move and that markets seemed comfortable with Harris on the ballot.

The economist and author of “An Economist Walks Into a Brothel” cited the Wednesday-morning implied market opening as a sign that investors weren’t surprised “by any stretch” about Harris.

“Markets are forward-looking,” she added, “so I think to some degree they’ve already priced in a possible Biden presidency. Because they’re thinking years out, and I think markets would be moving very differently if it were a Bernie Sanders candidate already by now.”

Last summer, Harris released a plan for an expanded version of Medicare that would involve taxing stock trades at 0.2%, bond trades at 0.1%, and derivative transactions at 0.002%. Schrager said on Wednesday that she didn’t think this would happen.

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“I’m not sure,” she said. “I mean, Biden definitely has some tinges of populism and anti-finance, but I think, again, they sort of tend to be a very pragmatic ticket, and, I mean, that would be a major structural change to markets, which I can’t imagine they’re going to make.”

Instead, Schrager said, the nation could expect higher income taxes and corporate taxes under a Biden-Harris administration.

Schrager also said that market noise in the fall wouldn’t be from the election but from developments with the coronavirus outbreak, vaccines, and infection rates in the South and the Midwest. That was the opposite of what Goldman Sachs’ chief economist David Kostin told CNBC on Tuesday.

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“Everyone mostly on the buy side, hedge funds, mutual funds, portfolio managers” already expect a vaccine in the fall, and uncertainty rests on the election results and changes in the tax rate, Kostin said.

Schrager said of Harris, “When people say she’s a pragmatist, that’s probably fair.” She said that Biden and Harris “aren’t particularly risk-takers as candidates,” adding that much economic uncertainty depends not on the presidential pick but Senate elections.

“If it’s a big Democratic sweep, then they’ll probably feel like, OK, there’s more of a mandate to really remake this economy,” Schrager said. “But if the Republicans hold on to the Senate, I don’t think we can expect a lot of dramatic changes.”

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