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The Obama Trade: Health Care, Financials

Next week it seems likely that health care and bank reform will dominate headlines as important bills make their way through Congress.

What must you know?

Financial Reform

Senate Banking Committee Chairman Christopher Dodd has broken off talks with Republicans on a bipartisan bill and announced he will unveil a Democratic bill next week and bring it before the committee for debate and a vote.

Three major issues prompted the breakdown in talks -- consumer protection, shareholder rights, and derivatives regulation. They will be key to deciding the outcome, along with the actions of a handful of moderate Democrats.

Dodd is now likely to include proposals in his bill that Republicans flatly oppose, namely a powerful new watchdog for financial consumers, and new clout for investors on setting executive pay and nominating corporate directors.

Disagreement persists on regulating over-the-counter derivatives, including credit default swaps, as well.

But on other topics -- such as regulating systemic risk, streamlining bank supervision, and resolving distressed financial firms -- progress has been made toward bipartisan agreement and Dodd will likely include those compromises.

Health Care

Congressional Democrats are drawing closer to agreement on a broad healthcare overhaul that could lead to a final vote in the next few weeks, but vowed not to be bound by White House deadlines.

Senate Democratic leader Harry Reid told reporters there were still issues to work out in the reform package, and House of Representatives Speaker Nancy Pelosi said she was addressing the concerns "member-by-member."

But Democrats said they were close to hammering out with the White House the final changes on taxes and consumer affordability that could break months of legislative gridlock.

How should you trade?

The bills will probably make investors nervous and I think the markets take a hit short-term, says Daniel Clifton of Strategas Research. But long-term I fully expect the clarity to take stocks higher.




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