Wall Street to Obama: The Love Affair Is Over
Now, the scene has changed dramatically. Corporate profits are booming again but President Obama's popularity is sinking fast. The list of financial and business titans claiming that Democratic policies are impeding the economic recovery and hurting US competitiveness, meanwhile, gets longer by the day.
Of course, much of the business sector has always harped about government interference. But now even high profile investors and executives who were once ardent supporters of President Obama are changing their tune. Investors should take note of the fast-defecting business community, since the upcoming Congressional elections could have a major impact on markets in the intermediate term.
Big Players Turn Away
Famously acerbic hedge fund manager Daniel Loeb, manager of the $3.4 billion Third Point Partners, became the most recent Wall Street heavy weight to turn on the Obama administration. In a letter to his firm's investors, Loeb blasted government interference in the economy.
Loeb lambasted the case against investment bank Goldman Sachs (GS) as a witch-hunt and said his firm had to exit investments in educational companies because of the risks posed by a politically charged atmosphere surrounding student lending.
Loeb's accusations are especially stunning since the hedge fund titan was among the biggest backers of the Obama administration just two years ago. But he has some esteemed company in the hedge world when it comes to newfound disillusionment with Obama.
Reports recently surfaced that Steve Cohen, head of the giant SAC Capital, held meetings at his house with that included other industry heavyweights strategizing about how the Republicans could win the midterm elections.
Cohen's move may mirror the shifting allegiances at his firm. SAC employees gave 71% of their donations to Democratic candidates during the 2008 election cycle, according to the Center for Responsive Politics. But employees had now given 93% of their contributions to Republicans as of August 1, as the midterm elections approached.
The growing discontent on Wall Street seems to echo that coming from business executives earlier in the summer. Once seen as an Obama ally and a key player in shaping things like energy policy, GE (GE) CEO Jeffrey Immelt lashed out at the President earlier this summer and accused the administration of creating a sour economic climate.
Much like Loeb, some high-profile corporate executives see the Democratic agenda as meddling too much in how business is run and creating more uncertainty at a time when plenty uncertainty already exists.
"The most important thing the current administration can do is remove the number of variables out there," Paul Ottellini, head of semiconductor juggernaut Intel (INTC) recently said. "There are so many things where business leaders can't predict what's going to happen."
Investors would be wise to put their partisan biases aside and observe the major shifts. It is telling that so much of the criticism seems to be coming from onetime supporters rather than ideologues who perpetually have an axe to grind.
And a reduction in policy uncertainty – either through a toned down Democratic agenda, or significant Democratic losses that lower the chances of implementation – could serve as a major driver for the markets in the coming months.