Obama’s priorities, as seen from Wall Street

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Some reaction from Wall Street today to Sen. Barack Obama’s election as president:

--- ‘Obama’s historic win . . . will grease the skids for several policy initiatives. There seems to have been a consensus in Congresss prior to the election to aim future stimulus efforts toward beleaguered state and local governments, infrastructure projects (roads, bridge, highways, schools, rails, dams, ports etc.) and unemployed workers. The centerpiece of Obama’s economic plan is a middle-class tax cut, which probably will be put into motion sooner rather than later. Considering the stagnation in median incomes during the most recent business cycle, these tax structure changes may be permanent rather than temporary.’ -- Michael Darda, chief economist, MKM Partners

--- ‘Barack Obama is a lucky man. The worst of the recession may be happening before he enters the White House. He can take credit for the recovery, unless he prolongs the recession by raising taxes. Hopefully, his economic advisors will tell him that the economic situation is so bad that his administration must begin by stimulating the economy. In other words, the New Deal must take precedence over the Fair Deal. The Bushies seemed more focused on reactively stabilizing the economy than on stimulating it. The Obamites are likely to be much more proactive, using all the resources of the government (that are left) to get the economy growing again.’ -- Edward Yardeni, economist and president, Yardeni Research Inc.

--- ‘Exit polls indicate that the economy was overwhelmingly the most important issue deciding this election, as expected. That being the case, we expect Obama to move decisively to address economic stress. We suspect he will support even more fiscal stimulus than the $200 billion we have penciled in to our forecast; Congress could move on this even before the change-over on January 20. The president-elect has also advocated a 90-day moratorium on foreclosures; how this fares in Congress is less certain.’ -- Goldman Sachs & Co. economists

--- ‘Taxes, especially on the wealthy and corporations, are likely to increase. Objectively speaking, that is not necessarily bad. The key question, which seems to be ignored by most observers, is what are the economic ‘multipliers’ for programs funded by the new tax revenue? Raising taxes isn’t so bad if the multipliers associated with spending programs are bigger than the negative multipliers associated with raising taxes. Regulation across a broad scope of industries is likely to increase, but investors should try to keep an open mind. The financial sector might be a prime target, but investors typically benefit from additional transparency.’ -- Richard Bernstein, chief investment strategist, Merrill Lynch & Co.

--- ‘With the economy in recession, we think the government will be forced to borrow more money and to increase tax rates simply to keep itself running. However, while tax rates will likely climb during President Obama’s administration, the increases are not likely to be as steep nor as sudden as many fear. If there is a silver lining in the recent economic turmoil, it is that there will be little appetite for significantly raising taxes when times are so difficult for many Americans. We would be surprised to see significant tax increases enacted in 2009.’ -- Bob Doll, chief investment officer for equities, BlackRock, Inc.

--- ‘Wall Street tends to embrace fiscal conservatives who champion laissez faire. Traditionally, that has meant rooting for a Republican. It is therefore quite interesting to me that the market has not traditionally performed as well under a Republican administration as under a Democratic one. Since 1945, the Standard & Poor’s 500 gained an [annual] average of 10.7% in the 28 years that a Democrat occupied the White House, while the index gained only 6.4% annually, on average, in the 36 years that a Republican was in office.’ -- Sam Stovall, chief investment strategist, Standard & Poor’s