Wall Street watching presidential campaign
There are no quick fixes for the weak economy, the poor performance of the nation's financial institutions, the inadequacies of regulatory agencies or the need to formulate clear national policies on pressing issues such as energy.
The best that can be said is investors and Wall Street will at least know what they are dealing with. That positive for the markets often prompts a post-election "relief" rally. In addition, entering office in bad times does provide a new president with opportunity to improve things.
"The markets hate uncertainty, so as we get closer to the election, any contradictions in the candidates' policies can cause anxiety," said David Kudla, chief executive and chief investment strategist for Mainstay Capital Management in Saginaw, Mich. "We tend to see a relief rally after a presidential election, no matter what the outcome, because there finally is some certainty."
Wall Street usually favors Republicans for their pro-business stance, though this does not assure financial markets will fare better during their administrations. There are definite differences in tax policies on investments espoused by Republican Sen. John McCain and Democratic Sen. Barack Obama.
Obama wants to raise the capital-gains tax rate for those in the highest tax brackets, with no change in corporate rate. McCain would leave the capital-gains rate unchanged but cut the corporate tax rate gradually from 35 percent to 25 percent.
"In the short run, if there is a need after the election for an economic-stimulus package, McCain or Obama would pass one, and if there isn't such a need, neither would pass one," said James Paulsen, chief investment officer for Wells Capital Management in Minneapolis. "But looking at the next presidential term, major issues such as health care and energy policy must be addressed, no matter who wins."
In health care, Obama wants all Americans to have health coverage and would spend tax dollars to do it. McCain would reduce regulations to permit more choices for consumers by allowing health-care companies to sell across state lines.
In energy, both want action to deal with climate change and dependence on foreign oil. Obama wants subsidies for solar and wind energy, while McCain supports incentives for nuclear power. Republicans have been pushing for increased domestic oil and gas exploration and drilling.
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