McCain or Obama: Boost for the Stock Market?
Investors Fear Activist Legislation and Higher Taxes
Oct 8, 2008
With less than a month until the Presidential election on November 4, 2008, investors in the stock market are carefully looking at the the candidates platforms and listening more closely to the rhetoric to decide whether the stock market will go up or down after the last vote is cast.
Obama Proposals
A major concern of investors is the proposals to reform health care. The health plan of Barack Obama is widely expected to squeeze profit margins in the health care industry, particularly for big insurers such as United Health Care Group (UNH) and Humana (HUM).
Obama's environmental proposals may help alternative energy companies. Obama also plans to spend more on the infrastructure and universal internet access which could help construction firms and the technology companies.
McCain Proposals
Investors look more favorably at John McCain's more modest plans which generally favor less regulation, lower taxes on the wealthy which may help upscale retailers and investment firms. Although there is not much difference between the two men in the fight against climate change, on taxes and health care, McCain continues traditional Republican positions. He poses less threat to investors who tend to prefer stability and fear new rules and regulations.
Obama versus McCain and the 2009 Congress
It is expected that the Democrats will gain enough seats in the House and Senate to have control of both bodies. Many investors believe that the economy works best when the President and Congress come from two different parties especially when each has a different political philosophy. The fear is that with a Democrat in the White House and Congress controlled by the same party, sweeping legislation could take place that would not benefit the financial community which believes in such things as free trade and lower taxes, especially those that pertain to capital gains and dividends. Many investors expect that a President McCain and a Democratic Congress would eventually reach some kind of compromises on the budget.
In an article, "Obama, McCain, and the Stock Market "(Business Week, Aug. 22, 2008), writer Ben Steverman advises, "Here's one way to figure out how the 2008 election will effect the stock market. Look at the Presidential candidates' platforms and speeches, and decide whether they would hurt or help particular industries."
As the stock market continues to decrease in value, it may be evidence that the volatility may be caused by concerns about increases in capital gains and dividends, and changes in free trade laws.There is nothing the market dislikes more than uncertainty and the potential for major policy changes next year may be weighing heavily on investors attitudes.
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