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November 07, 2008 at 07:00 PM
What will happen in the markets?
[W]e believe the election decision itself will likely act as a tonic for asset values. Investors during these difficult economic and financial times welcome the energy and leadership that the new president will almost certainly bring to the resolution of this crisis. The positive behavior of the equity and credit markets during the week leading up to the election speaks to this effect, though certainly there are many other influences acting on markets as well.
What’s the direction for taxes?
With the Obama victory, the markets will lose any hope they had for John McCain’s proposed corporate tax cut. Given how the polls were going up to the election, however, markets likely had long since given up on this prospect, leaving investors with little need to make additional adjustments now.
On other tax issues, the market will not likely welcome Obama’s proposal to allow the top tax bracket to return to its former level of 39.5 percent and to raise capital gains taxes on higher-income families, from 15 percent to 20 percent.
Doubtless, investors will have difficulty with the president-elect’s proposals to address Social Security’s funding by raising employer and employee withholding from higher incomes by one to two percentage points or to remove corporate tax breaks for firms that move jobs overseas.
But it also seems likely, in this fragile economic and financial environment, that the Obama team will put off such tax hikes for a while at least. Even leading Democratic proponents, such as Representative Barney Frank (D-MA), have argued that the present economic environment argues against immediate tax hikes.
