With the end of the US election, managers begin to plan for new administration`s effects....

Opalesque New York: For the US financial markets, as the credit crisis unfolded there was, along with the desire for immediate action, a sense that the government was taking temporary steps until the election would decide which administration would be the next to hold office.

As the November 4th election has determined the next US President to be Barack Obama, hedge fund managers gathering at the Walkers "Fighting the Tape" seminar on Thursday (November 6th) will include in their discussions on the outcome of the Presidential Election and the direction of the hedge funds industry.

"I do not look for a President-elect Obama to increase taxes on successful individuals as he has proposed. It is one thing to get elected, another to govern." Professor Jeffrey Rosensweig, Director of the Global Perspectives Program at Goizueta Business School of Emory University told Opalesque. A speaker at the "Fighting the Tape" seminar, Prof. Rosensweig will examine the global economy, market trends, changing demographics and global opportunities for investors and investment managers. "Given the backdrop of looming recession, he will realize this is no time to raise taxes on those who create jobs and/or put capital to productive use, and would face the disincentive of high marginal tax rates which he currently proposes."

Neil Michael, Head of Quantitive Strategies at SPA ETF recently released a global economic outlook ahead of the US election. He cited rising unemployment on the back of sharply slowing industrial production, expectations of economic activity to continue to worsen as economies de-lever, and the sharp deterioration of the OECD leading indicator of US economic activity as reasons to expect that "Since the real economy will continue to slow through next year on the back of the credit crisis and its recent intensification, equities are unlikely to experience a sustained rally this year."

This situation and these expectations for a continued slowdown in the US economy have the potential to change normal expectations of the actions of a Democratic administration. Regarding fears of finance and business executives of a Congress and Presidency controlled by the Democratic Party (as of the writing of this article "Democrats continued to hope for the kind of extensive sweep that would leave them with a 60-vote majority in the Senate, giving them the power to cut off filibusters" Source), Prof. Rosensweig does not believe that such Democratic domination will lead to massive government spending.

"In this unique case, such fears may be unfounded. First, the outgoing Administration was one of the most profligate in U.S. history, to the dismay of many Republican fiscal conservatives. Second, the present time, for the first time since the Great Depression, may call for some direct government spending to stimulate the economy. The job market is fragile at best, and could soon become awful. This is already apparent in the financial services industry." Prof. Rosensweig says.

"Similar to the jobs created by FDR in the 1930s, a President Obama, if he does win, may work with a Democratic Congress for a second stimulus package. The first one, tax rebates, had only limited impact because much of it was sa......................

Source:
http://www.opalesque.com/AMB2008/48225With_the_end_of_the_US.html