Since the next President will not sit in his or her office until next January, there is little that person can do, directly at least, about the current economic crisis. Many, if not most, of the mortgages which will fail in the US will fail between now and early next year. There is a wave of ARMs that reset over the next few quarters.
Interest rate policy belongs to the Fed. The new President may have a bully pulpit, but it is not one which will be mounted until rates have been dropped at least two or three more times.
An economic stimulus package should be passed by mid-year. It will probably be worth $150 billion, most of its in tax rebates. Whether that will work to keep the economy going is a matter of debate.
What does bother the stock market is that there may be no decision on who the candidates will be until late Summer. Sen Clinton did well enough yesterday to make that likely. Traders hate uncertainty. The already face it in great bushel baskets as the economy loses steam, the dollar gets deeper into trouble and commodities prices take off.
Once each party has a nominee, the debate about what should happen to fix the economy can begin in earnest. The market will at least have a betting pool which is down to two horses. The number of options for economic policy that Wall St. will face in 2009 and beyond will be fairly clear.
Having three viable candidates is like having a hundred. Those still in the race will play off one another and pander to people in the parts of the economy that may give them votes. Pinning down three people is much more difficult than pinning down two. Two is a choice. Three is mayhem.
Wall St. wants to begin to make its plans for 2009. That is being put off as long as Clinton and Obama are both in. It give the markets one more thing to fret about.
Douglas A. McIntyre
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