Investors, Tune Out ‘Election Noise’ and Focus on Long Term: Wells Fargo Advisors Report

As for the nation’s debt ceiling—U.S. debt recently reached $16 trillion—Brian Rehling, chief fixed-income strategist for Wells Fargo Advisors, notes in the report that Congress will deal with the debt ceiling debate after the November elections. “Should a single party control both houses of Congress and the presidency,” he said, “the debate will likely be handled without the threat of a government shutdown and default.” However, “a split in power will be more problematic.”

The study notes that while the federal government’s fiscal woes generally take center stage, it’s also important to look at individual states’ financial problems, too. More than half of the states, the study notes, face projected budget shortfalls, which could hurt employment and the overall economy.

In the area of taxes, the Bush tax cuts expire at year-end. Gary Thayer, chief macro strategist for Wells Fargo Advisors, says Congress will take action on this issue before year-end, but not before the election. “Both parties have signaled the willingness to delay the expiration,” although Democrats want the cuts to expire for the wealthy and Republicans don’t, he said. While any extension to the tax cuts won’t likely be enacted until a new Congress is in session in January, he said, after the election we are likely to see “more substantive measures to address the fiscal cliff.”

Thayer warns that Congress only has “a small window to postpone the fiscal cliff until the newly elected leaders can address these issues.” However, he said, “elected officials cannot just extend things indefinitely. Congress will need to show a timeline for seriously addressing the nation’s fiscal problems.”