Wall Street girds for life under Mamdani, worries about New York City's competitiveness

By Lewis Krauskopf and Saeed Azhar

NEW YORK, Nov 4 (Reuters) - Wall Street braced for change with the election of democratic socialist Zohran Mamdani as mayor of New York City on Tuesday, an outcome set to reverberate in the heart of global capitalism as financiers worry about the city's competitiveness and business appeal.

Investors watching the results of governors' races in other states were also analyzing wins by Democratic candidates, saying they could be seen as evidence of renewed strength for the party against President Donald Trump's Republicans ahead of next year's midterm elections. In Virginia, Democrat Abigail Spanberger easily won the election for governor, becoming the first woman elected to that role. And in New Jersey, Democrat Mikie Sherrill also won the governor's race by a large margin.

Mamdani's win "will be an interesting experiment and we'll see how much he tries to really change New York City and how he is accepted," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Looking collectively at the New York City race and the Democratic victories in New Jersey and Virginia, Ghriskey said, "It's a fairly strong mandate against the administration in Washington."

Mamdani focused his campaign on affordability. His agenda includes a rent freeze for rent-stabilized apartments, free bus service, universal childcare and city-run grocery stores. His policies also include hiking taxes on New York City's wealthiest and raising the corporation tax, driving worries among the finance community that the city's competitiveness will suffer.

While New York's mayor has no direct oversight over Wall Street, the position sets the tone on perceptions of whether the city is business-friendly.

While many investors and financiers say they can sympathize with the affordability issues Mamdani has raised, they expressed broad misgivings about his tax policies.

"When I look at the economics around the cost of living in New York City and when a one-bedroom apartment in New York City is $5,000 a month, that's unsustainable," said Phil Blancato, chief market strategist at Osaic, in New York, after the election results. "And whether the rhetoric around what can be done or can't be done is true or not, that's the reason for this kind of ... victory in New York City. But when you think about the increase in taxes at the small-business level, corporate level ... that has a significant impact."

Some are hopeful that Mamdani moderates his positions or is confronted by roadblocks to achieving some of his aims.

A Mamdani win is "a risk I'm watching in 2026," said Dean Lyulkin, CEO of Cardiff, a private investment firm and small-business lender in San Diego, California, ahead of the election's being called.

"Actual policy often turns out much more benign than campaign rhetoric, but if other major cities follow this pattern, markets may start pricing in more tax and regulatory risks," Lyulkin said.

Mamdani's spokeswoman Dora Pekec said the mayor-elect's affordability agenda is good for the economy, as the provision of childcare will help businesses, with employees willing to remain in their jobs and have a higher quality of life.

"It's important that we have high quality of life for New Yorkers so that they want to keep starting businesses here," Pekec said.

Mamdani's main opponent was Andrew Cuomo, the former Democratic governor of New York state who ran as an independent.

Some heavyweights in finance poured money into efforts to defeat Mamdani, including high-profile investors Bill Ackman and Dan Loeb.

Some saw it as unlikely that Mamdani can achieve drastic change. Worries tied to Mamdani's victory are "somewhat overexaggerated," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, ahead of the election results, who believed Mamdani would face obstacles to implementing his proposals.

Some business people are ready to try and block some of Mamdani's proposals, including one to open five city-owned grocery stores - one in each borough - that would sell food at wholesale prices. Opponents in the business community see the proposal as unworkable, saying it would undercut store owners.

David Schwartz, director of the New York Association of Grocery Stores (NYAGS), said he would be part of a group that will oppose the grocery store proposal. "Just because he campaigned on it doesn’t mean he’ll be able to implement it,” he said.

Other races, including in Virginia and New Jersey, were seen as key in offering insight into how Americans are thinking about the ongoing U.S. government shutdown and which political party is to blame.

If the Democrats win back control of just one of the chambers of Congress next year, it could cause "gridlock" in Washington that could make policy-making more predictable. Currently, Republicans hold the presidency and majorities in both the Senate and the House of Representatives.

Jamie Cox, managing partner at Harris Financial Group, said the election was a "very big wake-up call for Republicans on the midterms."

Ahead of the election results, Chris Grisanti, chief market strategist at MAI Capital Management, in New York, said a good night for the Democrats could mean "that they're going to be more likely to take back the House next year.

“Clearly everyone is trying to figure out which way the wind is blowing," Grisanti said.