Barry Sternlicht sees a 'significant correction in high flying stocks' with a Democratic sweep

  • Starwood's Barry Sternlicht said the stock market would suffer from a Democratic sweep.
  • "I think you'd see a pretty significant correction in high flying stocks in November," he said at the Delivering Alpha conference presented by CNBC and Institutional Investor. 
  • Sternlicht implied he is voting for Biden but said the former vice president is "not strong on the economy." 

Starwood's Barry Sternlicht said Wednesday he expects high flying technology stocks to fall from their heights if Joe Biden wins the 2020 election and Democrats take control of both chambers of Congress. 

 "Maybe long term, two, three years out the Democratic sweep would be OK but short term, with the change in capital gains taxes, I think you'd see a pretty significant correction in high flying stocks in November, whenever they announce the winner," the Starwood Capital Group chairman and CEO said at the Delivering Alpha conference presented by CNBC and Institutional Investor.

The 2020 presidential election — one of the most contentious battles in modern U.S. history— could mark a major turning point for stock investors as a potential shift in policies from President Donald Trump to Biden would have an impact on different sectors. Biden's policies include higher taxes and tighter regulations. 

"Assuming there is a clear favorite from the actual vote, forget about the mail-in vote, I'd expect you'd see some selling in the tech stocks, which have risen so far, because of the significant, huge proposed change in capital gains taxes," said Sternlicht. 

"I think short term it's going to be bad for the equity markets," he added. 

Sternlicht's comments came the day after the first of three presidential debates. Trump and Biden sparred on numerous issues, including their qualifications to manage the U.S. economy, police violence and the handling of the coronavirus pandemic.

"I think the debt markets will probably tick up, too. I think rates will rise slightly because of the spending," Sternlicht said. "You've seen no ability to keep [a] rein on spending from the Republicans for four years. Obviously we have a debt-fueled economic boom, but I think the Democrats will take it to a whole other level of complete unreasonableness." 

Sternlicht implied he is voting for Biden because of the environment and social justice issues, but he does not agree with Biden's tax plan.  

"I think capital gains taxes should be different because you want to encourage investment. I think it would be a disaster for long-term growth of this country. We need to invest in our growth. We need to increase the pie. … It's not dividing up an ever-shrinking pie," he said. 

Sternlicht — whose hotel business relies on a consumers feeling comfortable about traveling again — said the economy needs Americans to go back to work. 

Biden "is really not strong on the economy, he really doesn't have a plan," said Sternlicht. "He doesn't really understand the PPP program or who's hurting," he added, referring to the Paycheck Protection Program.

Sternlicht also called the Democrats "off base on the coronavirus." 

"We have to do what's intelligent, protect the elderly, and the rest of us have to be realistic. We really have lost it on the discussion of the coronavirus. We can't keep printing money this is going to destroy the economy. We have to get back to it."

"At least [Biden] said [at Tuesday's debate] he wouldn't follow the absolute insanity. I'm an environmentalist so I'm pro environment but the Green New Deal will destroy the country if implemented at the pace they want to do it," Sternlicht said. 

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