Wednesday, January 26, 2011
Stock Market: A New Clinton Effect?
It seems that the president recently altered his behavior regarding to the economy. In the first months of his regency the Wall Street Journal and other financial Media complained about Obama´s anti-business policy. They referred to his plans for raising taxes, expanding regulations and implementing an expensive health reforms, burdening companies with high costs. The intended tax hikes would especially endanger the healing of the economy, they declared.
But now it looks like that Obama changed his course. This seems to be a reaction to his party`s defeat in the midterm election in November. Now, Mr. President sounds much more business friendly than before. We see an alteration, especially in the tax policy. No tax hikes anymore. Shortly after the midterm elections Obama gave in and extended the Bush tax cuts. The extension of the low tax policy helps to stimulate the economy, the financial media explained.
The current wave of the stock market rally therefore could also be a reaction to the more business-friendly policy in Washington DC and the extension of the low-tax-policy. The current rally surge started already in September 2010. In these weeks the polls showed a high probability of a Republican win in the midterm election and therefore for the extension of the low-tax-policy.
The new status quo in Washington DC is like the epoch of Bill Clinton. This president started also with an anti-business left-wing rhetoric and revised his course after of a midterm election defeat. The then business-friendly policy of Clinton kindled a strong economy in the late 90s and lead to enormously gains on the stock market. Does history repeat? Do we get now a copy of the Clinton-effect?