Which of the following issues will be most important to you when it comes time to cast your vote in November?
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Hot-Button Election Issues & Your PortfolioSeptember 8, 2008 By Jamie Dlugosch, Contributing Editor, Investors Insights |
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Issue #1:
Mountains of Debt
Barack Obama plans to return Washington to fiscal discipline. That means reinstituting the PAYGO rules with respect to budgeting and limiting pork barrel spending. He would also fight against corporate tax loopholes and put an end to tax haven abuse. His signature plan is to reverse the Bush tax cuts for the wealthy while providing tax breaks for the middle class.
Analysis: Balancing the budget is inherently positive for stocks. Reductions in debt will make the dollar stronger and keep interest rates low. More dollars in the pockets of consumers will stimulate the economy.
Net Stock Impact: Bullish
John McCain has long fought pork barrel spending and resisted Republican efforts to blow the budget. If elected, he states that he will balance the budget by 2013. Doing so will require spending controls and elimination of earmarks. He will institute a pause on spending and make the Bush tax cuts permanent.
Analysis: McCain’s plan has a much more bi-partisan feel as compared to Obama’s. He is also making a guarantee of results with his promise of balance by 2013. Given his bias to cut taxes, accompanied by a severe aversion to tax increases, his plan will require significant spending cuts. Such a state will be restrictive for the economy, but making the tax cuts permanent will be positive.
Net Stock Impact: Neutral
