Wednesday, August 22, 2007

Is the Market Pricing in a Democrat President?

The recent downturn in the stock market has been blamed on the credit crunch which resulted from the downturn in housing sales, construction and prices. However at least a portion of the slump should be attributed to the rising prospects of a Democrat victory in the 2008 U.S. Presidential elections. But why would the market look so unfavorably on a Democrat president since the market benefited from our last Democrat in the White House?

Well there is no “Bill Clinton” among the front runners. (although Clinton did raise taxes in 1993). That is each has voiced support for increasing taxes once in office. . In the name of fairness, presidential candidates, Clinton and Obama have said they would let President Bush’s 2001 tax cuts lapse for families earning more than $250,000. Edwards goes further, saying he would repeal the Bush tax cuts, and not just wait for them to expire for households earning more than $200,000. And, speaking at a Senate Finance Committee hearing, the fourth ranking Democrat, Senator Schumer from New York, reiterated his opposition to any tax hike on capital, saying it would unfairly hurt New York's economy. But he indicated he was willing to tax high income Americans who earn their incomes via wages. So there does appear to be agreement among the four in terms of more heavily taxing high income WAGE earners, thus allowing lower income individuals, and high income CAPITAL recipients to continue to pay less than their proportionate share of the federal tax burden.

So investors across the globe see all of this as a threat to the U.S. economy and to the U.S. stock market. If my hypothesis is correct, the market will not begin a significant rebound unless and until we are assured that a Republican will win the elections of 2008.


Anonymous said...

This sounds a lot like Jim Cramar who said a Democrat party victory to take back the congress in October would cause the stock market to fall by 50%.

Reality says different though. The Dow, for example, has increased in value by over 1,000 since the Democrats took over congress. So Mr. Cramar was actually over 100% wrong in his projection at that particular point in time. Many others at CNBC were presenting similar projections of the US stock market in October.

One analyst on Fox News last Sunday assured viewers the Dow would reach 17,500 by the end of the year. Obviously he either feels the market is under priced or has some access or can interpret information better than those on Wallstreet.

Interestingly enough, Warren Buffett has made substantial contributions to the Democrats. So a Democrat party victory may not be all that bad after all.

Anonymous said...

I just wish politicians would consider self employed small business people in any tax decisions. We suffer financially, more than people imagine, when it comes to paying self employment taxes.

Anonymous said...

While Democrats think they’re striking out at the rich, they’re actually jeopardizing the retirement portfolios of millions of middle-income Americans. Firemen, police officers, and teachers, to name a few, are all represented by the big state and city pension funds. And these funds are heavily invested in the hedge and private-equity funds that the Democratic tax machine is targeting. Is this fact lost on the Democrats?

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