1. State of the Union or SOTU. Most of the content has been leaked already in the NYTand Washington Post so it won’t be new news by the time the President speaks tomorrow night. However, the President is likely to push for new spending on infrastructure, education and technology. The Republicans are going to oppose any new spending and the House Budget committee meets today to lay out their framework for limiting federal government growth.
One of the rumors that keep surfacing is a new push from Obama for a Homeland Reinvestment Act II. Allegedly, this new act would again cut the dividend tax for repatriating income held overseas from 35% to 5%. In 2004, President Bush got this done and it went into effect in 2005. It led to a strong rally in the US dollar in Q4 of 2005. It’s estimated that close to $1 trillion dollars is held overseas currently and most of that is by US drug companies. Democrats don’t like this dividend cut as they believe that the money brought home won’t specifically be channeled into jobs and factories.
For the markets, this will be the most compelling reason to watch the spectacle.