(For other news from the Reuters Wealth Management Summit,
* TD Ameritrade CEO says government must prune spending
* Evercore Wealth chief warns against gridlock
* Stifel CEO sees Obama policies "pummeled" in elections
* Glenmede: stocks usually rise after midterm elections
(Adds Glenmede CEO, and historical background on stock market
performance after midterm elections)
By John McCrank and Joseph A. Giannone
NEW YORK, Nov 2 Brokerage bosses were hoping
for a more business-friendly government as Americans voted in
midterm elections on Tuesday, but they raised concerns that
partisan wrangling in Congress could impede economic recovery.
Tuesday's elections could help financial markets and the
U.S. economy by reining in government spending, Stifel
Financial Corp (SF.N) Chief Executive Ronald Kruszewski said at
the Reuters Wealth Management Summit
The brokerage and investment banking chief said he is
confident that Stifel is well positioned to continue its
decade-long ascent, but that mounting U.S. government debt and
an unsteady economy keep him up at night.
"The problem is policies that continue to build government.
Government that is too large can, in and of itself, smother an
economy," he said.
In the elections, amid high unemployment and economic
uncertainty, the Democrats were expected to lose their control
of one or both houses of the U.S. Congress, a setback for
President Barack Obama.
TD Ameritrade Chief Executive Fred Tomczyk, also appearing
at the Summit on Tuesday, said while change in the government
may inspire some confidence among investors, it will not last
if the different branches of government do not work together
better to focus on jobs and the economy.
"While the market has come back 9 or 10 percent since Labor
Day, people are still quite cautious. They see high
unemployment, they don't know where we're going," he said.
In contrast to Kruszewski, Tomczyk said more stimulus may
be required on top of tax cuts, as well as spending
"Running the country is not a whole lot different than
running a company. You have to prune some expenses. There's
always room for some pruning, but you have to provide
investment in things that stimulate the economy," he said.
Jeffrey Maurer, head of boutique firm Evercore Wealth
Management, where the average client has about $8 million in
investments, echoed Tomczyk's concerns about gridlock.
"I think this country faces very real and dangerous
threats, both economically and in foreign affairs, and that
requires our best thinking," he said.
If there is a stalemate in government, "the Bush tax cuts
will disappear and there won't be anything constructive to take
their place to stimulate growth and to help the small
businessman who carries a disproportionate burden of creating
jobs in this country," he said.
Another area that Tomczyk said was a concern to TD
Ameritrade, which runs the largest U.S. discount trading
platform, was the likelihood of an extended period of low
He said that in 2007 and 2008, half of the firm's revenue
were interest rate-sensitive. The net interest margin of those
assets has been cut by more than half.
At Stifel, a middle-market investment bank that underwrites
stock offerings, arranges deals, trades securities and helps
manage money for individuals, economic growth is critical. The
St. Louis-based company has seen its stock drop 18 percent this
year as these businesses have suffered.
MARKETS COULD ACTUALLY PROSPER
Kruszewski took the view that a Congress where neither
party has control might be good for financial markets.
"There's a lot of policy decisions that have to be made,
starting with that today," he said. "Obama's going to get
Financial industry firms bitterly fought legislation
championed by Obama and passed by Congress in July that
provided the broadest overhaul of U.S. financial rules since
the Great Depression of the 1930s.
The law tightened regulations across the financial industry
in an effort to avoid a repeat of the 2007-2009 financial
crisis. It established new consumer protections, gave
regulators greater power to dismantle troubled firms, and
limited risky trading activities.
"The best outcome for the election for us is an outcome
which instills a sense of some urgency in Washington across
political lines," said Kruszewski.
Gordon Fowler, chief executive of money manager Glenmede,
said at the summit that over the past 50 years, the impact of
midterm elections on stock markets has normally been positive.
He said that since 1950, the S&P 500, on average, has risen
16.9 percent in the year following U.S. midterm elections, and
after two years, it's been up an average of 27.3 percent.
"Historically in third years of presidential terms, people
in Washington usually get together and make sure the economy's
humming by the end of the four year term," he said. "It's also
an opportunity for people unhappy with the current state of
affairs to see events change."
(For more on the Reuters Wealth Management Summit, see
(Reporting by John McCrank and Joseph A. Giannone. Editing by
John Wallace and Robert MacMillan)