Barry Sternlicht sees a ‘significant correction in high flying stocks’ with a Democratic sweep

Investing

Barry Sternlicht, Starwood Capital Group Chairman and CEO, speaking during the 2020 Delivering Alpha conference on Sept. 30th, 2020.

CNBC

Starwood’s Barry Sternlicht expects high flying technology stocks to fall from their heights if Former Vice President Joe Biden wins the 2020 election and Democrats take control of both chambers of Congress. 

 ”Maybe long term, two, three years out the Democratic sweep would be OK but short term, with the change in capital gains taxes, I think you’d see a pretty significant correction in high flying stocks in November, whenever they announce the winner,” Starwood Capital Group Chairman and CEO Barry Sternlicht said at the Delivering Alpha conference presented by CNBC and Institutional Investor on Wednesday. 

The 2020 presidential election — one of the most contentious battles in modern U.S. history between incumbent Donald Trump and Biden — could perhaps mark a major turning point for stock investors as a potential shift in policies would have an impact on different sectors. Biden’s policies include higher taxes and tighter regulations. 

“Assuming there is a clear favorite from the actual vote, forget about the mail in vote, I’d expect you’d see some selling in the tech stocks which have risen so far because of the significant, huge proposed change in capital gains taxes,” said Sternlicht. 

“I think short term its going to be bad for the equity markets,” he added. 

Sternlicht’s comments come the day after the first of three presidential debates. The candidates sparred on a number of issues, including their qualifications to manage the U.S. economy, police voilence and the U.S.’ handling of the coronavirus pandemic.

“I think the debt markets will probably tick up too. I think rates will rise slightly because of the spending,” Sternlicht. “You’ve seen no ability to keep rein on spending from the Republicans for four years, obviously we have a debt fueled economic boom but I think the Democrats will take it to a whole other level of complete unreasonableness.” 

Sternlicht implied he is voting for Biden because of the environment and social justice issues but he does not agree with Biden’s tax plan.  

“I think capital gains taxes should be different because you want to encourage investment. I think it would be a disaster for long term growth of this country. We need to invest in our growth. We need to increase the pie….Its not dividing up an ever-shrinking pie,” he said. 

Sternlicht — who’s hotel business relies on a consumers feeling comfortable about traveling again — said the economy needs American to go back to work. 

Biden “is really not strong on the economy, he really doesn’t have a plan,” said Sternlicht. “He doesn’t really understand the PPP program or who’s hurting.”

Sternlicht also called the Democrats “off base on the coronavirus.” 

“We have to do what’s intelligent, protect the elderly, and the rest of us have to be realistic. We really have lot it on the discussion of the coronavirus. We can’t keep printing money this is going to destroy the economy. We have to get back to it.”

“At least [Biden] said [at Tuesday’s debate] he wouldn’t follow the absolute insanity, I’m an environmentalist so I’m pro environment but the Green New Deal will destroy the country if implemented at the pace they want to do it,” Sternlicht added. 

The Delivering Alpha conference is presented by CNBC and Institutional Investor.

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