2020 Minimum Wage Hikes To Help Or Hurt Economy?

With stocks on a high note, it’s easy to see numerous potential catalysts that could throw it into a correction. However, it’s up to investors to determine which potential catalyst has a negative enough expected value to end this great streak. One potential negative catalyst the stock market is ignoring is Bernie Sanders’ increasing odds of winning the Democratic nomination. Bernie Sanders has strong grassroots support as evidenced by the fact that he raised the most money in Q4 2019 and had 1.8 million individual donors. He raised $34.5 million in Q4 which was much higher than his Q3 total of $25.3 million.

(Click on image to enlarge)

Source: PredictIt

Yes, Bloomberg has almost unlimited money to spend on a relative basis, but that’s pushing on a string without strong supporters. Money raised is a strong signal of the health of a campaign. Bernie raised the most which could be scary for investors as he is a left-leaning candidate. Markets would much prefer Buttigieg and Biden (moderates) who raised $24.7 million and $22.7 million, respectively. (Warren raised $21.2 million which was down from $24.6 million). The other strong point for Bernie is he leads the betting odds for the first two states. As you can see from the chart above, Bernie has a 40% chance of winning Iowa and Buttigieg is at 30%. In New Hampshire, Bernie has a 52% chance and Biden is at 19%. In the average of recent national polls, Biden is ahead of Bernie by 9.2 points as his average is 28.3%. Sanders is in second at 19.1%. Warren and Buttigieg are at 15.1% and 8.3%.

Minimum Wage Hikes

The national minimum wage has been stuck at $7.25 since 2009, but there have been hikes in states and cities since then which have helped low-income wage growth. Minimum wage hikes lower the number of jobs, but in this labor market there are excess openings, so that’s not an issue. In a recession, these minimum wage hikes will have more negative effects because there won’t be as many jobs available. Politicians might lower or delay hikes to avoid some of these consequences.

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