How the Democratic midterm win could impact Wall Street and crypto regulations

Wall Street is watching Washington following last night's, what they're referring to as sort of this Democratic blue wave. So investors are bracing for some increased scrutiny of Wall Street, possibly delays in regulatory appointments, potential pressure on defense stocks. Um... S&P 500 already posting double-digit gains this year, but what market optimism could be potentially maybe getting ahead of itself? So to break this all down for us, we're going to bring in senior managing partner of Bellet Capital, Gerson Gibbs, to tell us a little bit more about it. Mr. Gibbs, a pleasure, sir. Thank you for taking the time. I appreciate you. Thank you for having me. Of course. So talk to me about what they're referring to as the Democratic blue wave of last night. What does that mean for Wall Street and investors coming in the months ahead? I think there's just gonna be some changes, some rules are gonna be potentially stalled. Ultimately, the White House has the decisions. But there have been a lot of lax and relax on the regulatory scrutiny surrounding Wall Street in the past few months. And because the party has shifted the chambers and this hasn't happened, and this is only the fifth time that this has happened since World War II. Now there's gonna be additional scrutiny, things like crypto are gonna be impacted, the prediction markets, the regulations surrounding that, private equity markets. We just know that the Democrats take a different approach to regulatory scrutiny, and there's gonna be some pushback. I won't say immediate changes, but definitely some pushback. You mentioned only the fifth time since World War II. Is there anything to learn from the previous four times, or is it a matter of that was a different time in history and the world was different and the market was different, and so there's not really as much to learn? Well, there's always something to learn from history. I believe that if you go back to each point, I believe the economy was in a certain place. Today, we are encountering a little bit of disease. We're seeing these prices skyrocket, we're seeing oil skyrocket, and we're involved in a current war. So I believe that this just shows that America is at some type of a dis-ease, and they wanted to change. So it led to a large win for the Democrats I'd like to talk a little bit about regulatory scrutiny. Do you anticipate any more congressional hearings involving Wall Street and the SEC and financial regulation? Absolutely, as I mentioned, when the Republicans were in control of Senate and And how there was some relaxation on the rules. And deregulation occurred a bit, and there were new rules presented to actually help the growth of certain markets like the crypto space, as well as the prediction space. So I believe that there's gonna be a lot of hold up, a lot of new hearings, some revisiting to certain rules and proposals that were made by the president, and definitely some slow down with regards to some rules being passed, and some might die on the by. You mentioned the slowdown. How much impact? Could Democrats have, by slowing down confirmations of key financial regulators, could they create or would that create potentially any kind of uncertainty in the market? Correct. I believe all regulatory scrutiny creates a downtick in the market. Some of these companies, we're seeing it. We've seen it throughout the year. A lot of these companies Companies are looking to IPO. To enter the market for the first time. And I believe that that was a result of deregulation. I believe with more regulation, there's gonna be tremendous slowdown because there's gonna be scrutiny around these potential IPOs and liquidity events that these companies are having. And with more scrutiny, it just adds more time to the process. And some of these companies may be a little reluctant to IPO with Democrats increasing the regulatory scrutiny. We were talking about history a little bit a couple of minutes ago. We've got, I believe, the Dow Jones on our screen right now for people to be able to see. We're seeing it's looking good. We're seeing green. And correct me if I'm wrong, historically, markets tend to perform well after midterm elections. One, is that true? I read that. Do you expect that pattern to hold this time, or is there a reason to be more cautious? I believe there's a reason to be a little more cautious. I don't think that anything's going to happen immediately, but I believe when that regulatory scrutiny increases a bit or Democrats begin to show what their proposed approaches are going to be surrounding the SEC and the Fed, we're going to see certain downticks potentially in the market. Okay. Traditionally, in midterms, we do see a bit of an uptick, but I do intend for there to be a bit of a downtick as some of these companies begin to pull back. I'd like to talk a little bit about defense stocks. Could concerns about changes or limits to defense spending put any kind of significant pressure on defense companies and their stock prices for people that are interested in that? Absolutely, absolutely. Again, I think one of the major concern was the United States involvement in this Iran war. And the first place that you're gonna attack is the budget that was put behind You know. defense. So I think that Democrats are definitely gonna take immediate look at the defense budget and look at some of these companies and how they're gonna be regulated to ensure that the Democrats are actually getting ahead of this war and trying to slow things down a bit. I know that the S&P 500, it's already posted double-digit gains so far this year. Are we or investors becoming too complacent, or is there still room for the market to climb in the remaining weeks of the year, I guess? I think there's a little bit of room to climb, but I also think there's a potential of a downtick. So there's a little bit of room. I believe some of these companies were already prepped and I don't see a lot of these changes taking effect until at least at minimum January or early into the first quarter of next year. So I believe into the end of the year, there's still a little bit of room to get into the market. And I do see the market performing decently, not well, but decently into the end of the year. Well, then springboarding off of that, sort of given the potential political and regulatory changes ahead, how do you think investors should be maybe positioning their portfolios right now, if they're now sort of looking at the cards on the table and trying to figure out what their next move should be? I think it's just about paying attention to what you're currently invested in, determine what type of companies you are concentrated in, because some of those companies May be impacted by the upcoming rule changes. I also believe that into the new year, there is a possible down ticket. There's also opportunities to get into the market a little bit, to see some opportunities that you wouldn't see before because these companies have been performing so well, as you initially mentioned, throughout the year. So I think it's opportunities on both sides. Just take a revisit at your portfolio and determine what's the best move moving forward and paying attention to what the Democrats are going to do and how it's going to work out between the White House and Congress and Senate. All right. Gerson Gibbs, the senior managing partner at Bellet Capital. Thank you for breaking this down. I know it is a lot of very complicated financial information, but you really helped us break it down in such a way that I think makes it understandable for people. So really, we appreciate your time, sir. Thank you for joining us. Thank you so much for having me. All right. Take care.