GO
Loading...

Romney Win Would 'Overall Be Better': Economist

Follow The Daily Ticker on Facebook

Coming into the homestretch of a hotly contested election, conventional wisdom is that a Mitt Romney victory would be better for the stock market, largely because of his plan to cut taxes on capital gains and dividend, as well as for corporations.

In addition, the U.S. is more likely to avoid going over the so-called fiscal cliff with a Romney presidency, says David Rosenberg, chief economist and strategist at Gluskin Sheff. "I think Romney's is portrayed aptly as candidate that could more readily come to a compromise with the opposition."

Related: Fiscal Cliff: "Major Market Meltdown" If Congress Does Nothing

If Congress takes no action before year-end, the combination of expiring tax cuts and a big drop in government spending set to take effect would almost certainly tip the economy into recession.

"Normally the President can only have a marginal impact but we're at an important inflection point; it could make a very big difference" who wins, Rosenberg says. "In so far as [Romney] can be a candidate that would be able to more readily compromise with the opposition, that would push me in the direction that he'd overall be better for the economy."

Related: It Doesn't Matter Who Wins in the Short Run, Says Gary Shilling

Whether a President Romney really would be more able to compromise with the opposition — or the opposition would be more willing to compromise with him — is hard to say. What's clear is that President Obama has been unable to make any headway with Republicans in addressing the fiscal cliff, at least to date, and the looming deadline is spooking the financial markets and corporate executives.

Related: CEOs Have Message for Romney and Obama: You're BOTH Wrong

Judging by this list of top corporate donors to Romney's campaign, Wall Street is certainly hoping for — and betting on — a Romney victory.

But there are major caveats to the idea the GOP standard-bearer would be "better" for the markets.

"What if he does live up to his promise to label China a currency manipulator and we end up mired in a trade war with China?," Rosenberg asks.

Related: Why Does Wall Street Dislike President Obama So Much?

Among others, the strategist also wonders how the market would respond to a Romney victory, given the candidate's pledge to not reappoint Ben Bernanke to another term as Fed chairman. "What has been the best friend to the stock market over the past year? Liquidity," he says. "In so far as Bernanke's day would be numbered with a Romney presidency…just something to keep in the back of your mind."

The New York Times reports Ben Bernanke will decline a third term, no matter who wins. But President Obama would likely appoint a dovish economist — like his former top economic adviser Christina Romer or current Fed Vice Chair Janet Yellen — to replace Bernanke whereas Romney is likely go for someone opposed to more aggressive Fed action like Stanford's John Taylor.

Related: Romney Wants Bernanke Out; One of His Advisers Doesn't Agree

Given the huge impact Fed policy is having — how else to explain the market's resilience to all the bad earnings and economic data of late? — it's a very big deal who the next Fed Chairman is, and who gets to make the appointment.

Finally, I'll note the obvious: The stock market has done very well during President Obama's first term — despite his populist rhetoric and claims from others that he's anti-business — and stocks have historically done better under Democrats vs. Republicans.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him ataltask@yahoo.com

More from The Daily Ticker

Do the Rich Have a Moral Obligation to Pay Higher Taxes?

Ignore Apple's Quarter, Analyst Says—The Stock's Still A 'Buy'

Stronger Than Expected 3Q Growth Weak By Historical Standards?

Check Out Yahoo! Finance's Breakout

Good Economic Data Meets Bad Earnings: Which One Is Wrong?

Microsoft Shares Are About to Bomb! Says Jackson

Google Is Mature, Falling Short and Fairly Valued: Kessler