Stocks come off their lows as Pres. Obama finished his speech...some say it is relief Obama is tackling the deficit, some saying it's because it will be tough getting some of his proposals passed.
Thanks to a judicious leak from a Congressional staffer earlier in the day, there was little of great surprise in the president's speech. Defense and health care stocks (particularly those exposed to Medicare and Medicaid) were already weak, and both groups have rallied off their lows since his speech has ended.
The renewed interest by the president in cutting the deficit (good news) is balanced by the insistence on refusing to renew tax cuts for the wealthiest Americans and seeking to limit itemized deductions for the wealthiest 2 percent of Americans.
This is a clear negative: higher taxes, with higher costs, and lower incomes...all means lower spending.
And...if you take away housing deductions...you kill the upper end of the housing market.
As for stocks, it will hurt upper level consumption (the richest 5 percent account for 14 percent of all spending). But since this won't happen for another two years the market is clearly thinking this is not as pressing as other issues.
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