David Einhorn's Greenlight Capital said it doesn't matter very much who wins the U.S. presidential election for the stock market.
"From a market perspective, we don't think it matters very much who wins," the hedge fund wrote in its Q2 letter to investors on Tuesday. "The economic policies of both parties are remarkably similar. Both favor large deficits despite a strong economy. We believe this supports our ongoing expectations of higher secular inflation in the coming years."
The letter argues that former President Donald Trump picked a vice presidential candidate who likely won't win him any additional votes.
As for the Democrats, "The Party probably had at least a half dozen other options that would have offered a clearer advantage against the former President."
"Given how fast events are unfolding, the only safe prediction is that the election will in fact, be held on November 5," Greenlight wrote in the letter. "Though both parties are competing to lose, inevitable one of them will fail ... and win," Greenlight wrote in the letter.
Separately, Greenlight said in the letter that the hedge fund reestablished a position in luxury handbag maker Capri Holdings (CPRI) as it trades at a "significant" discount to the $57 a share deal that it inked to be sold to Tapestry (TPR). Greenlight expects the Federal Trade Commission won't be successful in its lawsuit to challenge the combination.
"Upon review of the FTC complaint and the responses from CPRI and Tapestry, we believe the challenge is likely to be defeated in court later this year," according to a copy of Greenlight's Q2 letter viewed by Seeking Alpha.
The 2Q letter came out before Capri (CPRI) reported its FQ1 results on Thursday, with the fashion company reporting soft demand, especially with its Michael Kors and Versace brands. Wells Fargo analyst Ike Boruchow described the results as much "worse than feared" and sees a $28 bear case scenario if the deal is ended.
UBS reduced its standalone valuation for Capri, meaning no deal with Tapestry (TPR), to $15 from an earlier $21 estimate and Citi sees downside to $24 in a no deal scenario.
Baird analyst Mark Altschwager sees a Capri standalone value of low-to-mid- $20s if no deal happens, and he kept his price target of $57 a share.
"Our price target continues to assume deal completion (admittedly not a given as the FTC challenges the deal, with litigation pending) and no efforts by TPR to renegotiate deal terms (we suspect TPR is most interested in closing promptly, though recent CPRI results make this scenario more plausible.)