Investors clearly liked what they saw from Super Tuesday's Democratic primary results.
Former Vice President Joe Biden won a resounding victory in the blockbuster multi-state contest, clawing back Sen. Bernie Sanders from his frontrunner status in the Democratic primary race. Biden now leads the race with 433 delegates to Sanders’ 388 as of late Wednesday.
Biden capturing the Democratic nomination would be an immensely more palatable result for investors compared to a Sanders victory, and markets reacted accordingly on Wednesday, according to Patrick Healey, founder of Caliber Financial Partners.
“Biden had an incredible outcome yesterday, and I think the stock market [on Wednesday] is reflecting the favorability of that,” Healey said.
The S&P 500 surged 4.2% on Wednesday, which market watchers pinned on the Super Tuesday result, as well as waning coronavirus fears. The markets rise was led by health insurers, who would likely be threatened by Sanders' Medicare for All plan. Meanwhile, the S&P 500's information technology sector rose 4.3% on Wednesday.
Sanders’ opinions on corporate influence, and in particular Big Tech, are well known. The Vermont Senator has said that he would “absolutely” look to break up tech giants Facebook (FB) - Get Report, Alphabet (GOOGL) - Get Report, Apple (AAPL) - Get Report and Amazon (AMZN) - Get Report, and similarly consider splintering cable broadband firms and other sectors he has likened to monopolies.
How a President Biden would approach the tech industry is less well known.
Biden has spoken critically of Facebook, telling a NYTimes interviewer last year that he views CEO and chairman Mark Zuckerberg as “a real problem.” He said in the same interview that breaking up tech firms should be under consideration, but that it was “premature” to make a judgment call on antitrust matters. But he also called for the revocation of Section 230 of the Communications Decency Act, the clause that protects internet companies from liability for content that appears on their platforms, saying that companies such as Facebook should be held responsible for spreading falsehoods.
Biden also said that the U.S. "should be setting standards not unlike the Europeans are doing relative to privacy." And privacy is one area of tech policy that has drawn some bipartisan interest in Congress.
“The power of persuasion is a president’s main power -- and certainly, if the Democrats are successful in holding the House and in winning the Senate, you could see a massive legislative push forward,” said Dr. Dora Kingsley Vertenten, a professor at the Price School of Public Policy at USC.
Data privacy has seen a recent legislative push by states, creating a patchwork of laws that tech founders like Zuckerberg have decried. If a President Biden were paired with a supportive legislative branch, those laws could be reconciled at the federal level. And presidents can also drive tech policy through appointments to influential oversight commissions, such as the FCC, and to the federal judiciary: “Much of the decision making is done through the federal court system,” said Kingsley Vertenten.
In contrast to Sanders, Biden -- who served for decades in the Senate, and was a longtime member of the judiciary and foreign relations committees -- would be much more likely to approach tech policy from a security perspective, rather than from an economic perspective. That means Big Tech could find a more collaborative environment for moving policies forward in a Biden administration.
“I think there’s still an opportunity to shape policy with Biden because he comes from a framework that’s steeped in cybersecurity concerns,” Kingsley Vertenten added. “Tech would have a much easier time working with him in a positive sense.”
For investors, the prospect of a Biden presidency raises little cause for alarm -- even when considering a range of unknowns, namely what the makeup of the House and Senate will be come next year. Healey noted that a “divisive” nominee, such as Sanders, could have the effect of sinking investor confidence, even if some of his tough rhetoric on Big Tech has little chance of materializing in concrete policy changes.
The evidence is in Wednesday’s market performance, he said.
“I don’t think Biden would be looking to impose punishing regulation on tech,” Healey said. “It’s fairly evident in the trading activity that’s taking place now.”