To say Wall Street isn’t a fan of Zohran Mamdani would be an understatement.
In fact, high-profile investors and business leaders in the Big Apple are up in arms about the stunning win by the democratic socialist in the primary to win the Democratic nomination to serve as the next New York City mayor. The three-term Assemblymember’s potential victory in the November general election could bring what the Street hates most — tax hikes and tighter regulation threatening corporate and investment interests.
Philippe Laffont, founder of hedge fund Coatue Management, told CNBC that a Mamdani win could trigger another exodus of wealthy investors. Since the pandemic, a wave of wealthy residents and institutional firms have fled the nation’s largest city for low-tax states such as Florida and Texas.
“Some people are going to, for sure, go,” Laffont said on CNBC’s “Squawk Box” Wednesday after former New York Governor Andrew Cuomo conceded the Democratic nomination. “It’s not quite done yet. There’s still an election. Maybe Cuomo will re-enter as an independent.”
Mamdani’s emphasis on socialism and redistribution of wealth runs counter to Wall Street’s preference for unbridled capitalism and policies that support growth, such as deregulation and low taxes. The 33-year-old has supported taxing the ultra-wealthy, financial transactions and passive income like dividends. He has also endorsed a state-level wealth tax and increased marginal income tax rates on high earners.
Hedge fund magnate Bill Ackman said he woke up Wednesday “a bit depressed” by Mamdani’s victory. The Pershing Square chief said he’s now looking at the logistics for another candidate, not himself, to run.
Lawrence Summers, the former Treasury Secretary and president of Harvard University, also expressed his distaste Mamdani’s nomination.
“I am profoundly alarmed about the future of the [Democratic National Committee] and the country, by yesterday’s NYC anointment of a candidate who failed to disavow a ‘globalize the intifada’ slogan and advocated Trotskyite economic policies,” Summers said in a post on X.
‘Suicide by Mayor’
Part of the stock market has already felt the pain from the prospect of a Mamdani-led NYC. Shares of New York regional bank Flagstar, with exposure to the New York real estate market, sank nearly 4% Wednesday. Office-focused real estate stocks also suffered, with SL Green Realty down more than 6% and Vornado Realty Trust down nearly 7%.
Mamdani advocates for universal rent control, and the New York City mayor has the power to appoint representatives to the regulatory board that oversees rent-controlled and rent-stabilized apartments. A pause on rent increases would hurt the profits of multi-family rental properties.
Roughly one million New York City apartments are rent stabilized but only about 20,000 are still rent controlled.
“It appears that NYC is electing to commit suicide by Mayor,” Jim Bianco, president and macro strategist at Bianco Research, said in a post on X Tuesday evening.
‘Terror is the feeling’
Mamdani’s solution to most problems relies on an ideological commitment to taxpayer-funded spending, and that leaves the business community concerned, said Kathryn Wylde, president of the Partnership for New York City, a nonprofit group of CEOs founded by David Rockefeller in 1979.
“Terror is the feeling,” Wylde said on CNBC Tuesday morning as voters headed to the polls, although she noted that “there’s much positive in New York. But that could quickly shift if we lose confidence in the mayor.”
Wylde said the state government, led by Gov. Kathy Hochul, should keep the city out of a “disaster” scenario. She acknowledged concerns about the high cost of living and doing business, but said that raising taxes isn’t the solution.
Some of former Governor Cuomo’s strongest support came from the Upper East Side of Manhattan, the home to many of New York City’s highest earners and business titans. The former Secretary of the Department of Housing and Urban Development in the Clinton administration received more than seven out of every 10 first-choice votes in several of the precincts in this neighborhood, according to Associated Press data as of Wednesday.
In 2013, Bill de Blasio’s win also triggered anxiety among the financial elite, but he was able to ease fears by meeting business leaders directly before implementing sweeping reforms.
“We had Mayor DeBlasio for eight years. New York is really strong. I’m hopeful the same will happen,” Laffont said.