Believe it or not, there is a political analyst in Washington who doesn’t want to be on TV. In fact, there are several.
They don’t work for newspapers, websites, or think tanks — they work for the big Wall Street banks. And they grind out intensive analysis of the election cycle week in and week out — revealing who’s up, who’s down, and what it all means for government policy.
Call them the pundits of the plutocracy.
The banking analysts make up a small and little-known parallel universe of political commentary. But you won’t find them hanging around TV green rooms or working the lecture circuit.
“The more anonymous, the better,” said one bank insider.
That’s because the material he writes is designed for a very specific audience: the bank’s clients, including mutual funds, pension funds, insurance companies, banks, and anybody who manages assets. And although the analysis is written through a financial and policy lens, its conclusions can sometimes read just like the same thing you might hear from a panelist on CNN’s election night coverage, handicapping the chances of Donald Trump or Hillary Clinton.
Which raises the question: Why do the banks bother? The answer, say the people who compose the reports, is that there’s enormous demand from clients to understand the election and what it means in very specific ways for their money.
And that has the banks churning out reams of political analysis. “Trump is here for the long haul, with both strong finances and core support that should assure that he at least contends in most of the upcoming contests,” wrote Morgan Stanley’s government relations team in a client note on Feb. 10. “From here, the primary schedule heats up quickly and floundering campaigns quickly lose viability, making the vote and endorsement chase important for those that remain.”
Who wrote that? The bank won’t say. A Morgan Stanley spokeswoman declined to make the authors available for an interview, sending a short email to CNBC saying: “At this time we cannot accommodate your request.”
The big bank political analysis is not widely disseminated inside the Beltway. Even so, political figures with a finance or economics bent seek them out.
“They’re much more data driven than the impressionistic and poll-driven stuff you get on the networks, that’s their strength and their weakness,” said former Biden economic advisor Jared Bernstein. “They do a good job accounting for the economy’s impact, but they don’t pick up the weird altercations you see in the debates, stuff that drives cable news.”
It’s a small group. At Citigroup, Tina Fordham serves as the firm’s chief global political analyst. Citi says she focuses on “vox populi” risk, that public opinion can be a risk factor for investors. She’s focused on global instability and geopolitical dynamics. In a presentation in June, Fordham looked at flashpoints around the world, including the Russian relationship with the West, the rise of ISIS and EU elections. As for the U.S., she wrote, political polarization was likely to mean legislative gridlock, “but economic momentum and favorable demographics help blunt, but not eliminate, the impact of middle class anxiety.”
At Credit Suisse, political analysis is conducted by Margaret Gage, who headlined one recent client note “Super Tuesday: It’s All About That Base.” Predicting the results in South Carolina, Credit Suisse wrote, “We believe the Clinton, Sanders tie will soon come to an end, starting with Saturday’s showdown in South Carolina.” In the end, Credit Suisse was right — Clinton won the state.
At Goldman Sachs, analyst Alec Phillips writes client notes on the election. “The ongoing presidential nomination contest lacks any precedent in the modern era of presidential primary process, which began in earnest only in the 1970s,” Phillips wrote in a note to clients on March 8. “Outsider candidates have emerged in several previous elections but have never seriously contested either party’s nomination, let alone both at the same time.”
At Guggenheim Securities, Chris Krueger peppers his political analysis with shoutouts to classic rock songs. On Wednesday, his analysis of the Michigan primary was entitled “Detroit Rock City,” after the Kiss rock anthem.
“If the GOP Convention wasn’t shaping up to be a potential political dumpster fire, the Clinton/Sanders race and Philadelphia Convention would be getting far more attention,” Krueger wrote. “And in the meantime, Hillary will be feeling the political Bern and tacking Left on everything from fracking and trade, to Wall Street and prescription drug pricing.”
The big bank pundits tend to be numbers driven, and focused on data that their financial clients can understand: “We take all the polls and aggregate them before we put out an election piece,” said a public policy expert for a big bank. “We have spread sheets full of data, so we can say these are the circumstances for a brokered convention, and what that would look like.”
One example: “Iowa winner Cruz received eight pledged delegates toward his nomination, while Trump and Rubio each received seven,” Morgan Stanley wrote on Feb. 10. “Despite the declaration of “winners” and “losers” in the days after Iowa, the impact of the proportional allocation produced no true numerical (i.e., delegate) winner.”
The Wall Street analysts are also highly focused on what campaign trail rhetoric may mean for their audience: “In light of the current political atmosphere, it would not be surprising … to see proposals released over the next few weeks involving increased constraints on highly regulated industries like healthcare or financials,” Goldman Sachs’ March 8 note said.
Wall Street’s political analysts swim in an establishment sea in a year in which outsiders are dominating on the campaign trail. The big banks are most comfortable with candidates like Jeb Bush, John Kasich, Clinton or even Michael Bloomberg, who recently announced he would not run as an independent candidate. And that means that the banking analysts have had to be the bearers of bad news to their audience, which may not want to hear what it is being told.
“Our job isn’t to make the clients happy, it is to report what the facts are,” said the public policy expert. “We don’t want our clients to live in a bubble and be surrounded by yes men.”
So where is the 2016 election going to end up, according to Wall Street? The bank insider said his bet — like many of the pundits on cable television — is that the general election will feature Clinton against Trump. But he said his banking audience doesn’t realize just how close such a matchup in November could be.
“The head-to-head polling shows Trump losing in the general by 13 points,” the insider said. “Right now, I think the market is not really paying that much attention to the general election. But I have a feeling that there’s going to be a point when all of a sudden it looks a lot tighter, and that means more uncertainty for markets.”
He said he’s already trying to figure out just who President Donald Trump would appoint as chairman of the Federal Reserve.