The election of what many are calling a communist as mayor of New York City has a lot of people on edge.
Zohran Mamdani won decisively in the mayor's race on Tuesday. Since then, many have opined about the emigration out of NYC that is about to take place.
If Mamdani governs according to his campaign promises, this is a likely outcome. Of course, there is no guarantee of that as he already walked back one promise about defunding the police.
There are campaigns and then there is governance. They often divert from each other.
Nevertheless, this is an important component of a larger topic: capital flow. What happens when money leaves?
The Reality of Capital Flight
Money goes where it is treated best.
Since most, especially in the United States, fail to look at things on a global scale, they tend to miss the entire picture. Within the US, there is a lot of discussion about red versus blue states. Here we will discuss this ever important topic, one which has huge impacts upon the markets.
The EU is dying.
I stated this a number of years ago and have not changed my mind. Since that time, the largest economy has faltered. Germany is facing serious headwinds as the mercantile design is dead in a technological era.
This is compounded by the fact that most of the European leadership are warmongers. They are intent on going after Russia. NATO is the retirement home for neocons, meaning the "defense" alliance is interested in attack.
Neither of these propositions is conducive to capital. It is why there are tremendous flows towards the US. This benefits the US markets, especially the Dow which has the most international exposure.
We end up with an endless feedback loop.
As more capital is pulled, there is less money within the economic zone for funding of activities, including war. This means the social promises all come under fire. People are going to lose benefits they were promised simply because the money is gone.
For those in Europe, expect capital controls to come into play. The EU is going to limit the outflow of capital. It is all part of the playbook.
The Same in the US
Portland is a city that is starting to realize how the insanity can affect things. Recently, two major buildings in the downtown area were sold at a 90% discount from their peak. This resets the markets as comps come in on other properties. Ultimately, the tax base shrinks due to the lower valuations.
It is the result of the warzone (and filth) that is the downtown area.
Seattle is another city that is shooting itself in the foot. Amazon just laid off a large number of employees. Of the 14,000 that are being targeted, almost 2,000 are within in the city limits of Seattle.
Why is this important? Because Seattle implemented an increased payroll tax on larger corporations. Hence, Amazon, which has operations across North America, is simply reducing the headcount in the area.
Neither of these takes into the discussion of emigration. For a few years, the shift has been from blue to red states. Mandami, as mayor of NYC, will be sitting on the financial capital of the world. That said, it could be wrestled away very quickly.
Dallas is opening up a stock exchange in early 2026. South Florida already has the title of Wall Street 2, with many financial firms, including hedge funds, that relocated there.
The state of Texas employs more people in the financial services sector than New York City. This is a difference that is likely to grow.
Financial headquarters, like with JPMorgan, might stay in NYC, but other aspects of the business could move.
California, Illinois, and Massachusetts all face similar circumstances. Not only are they finding populations declining, but the mass migration is led by high income earners. They are the ones will the ability to move.
While this is often frames as a political discussion, the reality it is financial. Money is simply going where it is treated best. When high income earners have the opportunity to keep more of what they make, that is the path they will follow.
Is it any surprise that Texas, Florida, and Tennessee, state with no (or near zero) income taxes are the beneficiaries? This is coupled with the fact they are usually friendlier places to conduct business.