What will Investors Talk about Wednesday Morning?

by Jay Pestrichelli on November 5th, 2012

One of the best write-ups I’ve seen about the post-election market is on The Big Picture titled An Investor’s Guide to the Presidential Election. It’s one of his longer pieces, but worth the read. 

The article talks about the sectors that will be impacted, the tone of the Federal Reserve, Taxes, and Regulation.
 
I’ll add to the article the inflation trade. Under the category of the Federal Reserve, we have to expect Bernanke to accept a higher level of inflation. And actually, we believe he wants inflation to go up. So if Obama wins, look for Gold, the TIPS and materials to rise. These can be positives for the artificially supported market we’ve experienced in 2012. If Romney wins these sectors take big hits.
 
I’ll add a little more color for impact of taxes changes. Now this is a big IF because there will need to be Congressional approval for changes either way. But “IF” Romney wins, watch for investors to stay the course on higher dividend stocks as no changes are being proposed or even a reduction in the effective tax rate on dividends. However, “IF” Obama wins, look for an immediate sale of positions that have long term capital gains as well as a selloff of dividend stocks as their advantage starts to diminish.
 
These are the factors that push and pull to create markets and come Thursday, we’ll have a whole new set of data that will cause fear and greed, so stay tuned.


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