Tags: mccain | best | for | economy

McCain Viewed as Best Choice for Economy

Friday, 13 Jun 2008 09:44 PM

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Republican presidential candidate John McCain's tax policies have given him an edge as the better man for the economy, various Wall Street experts said at this week's Reuters Investment Outlook Summit.

But, against a backdrop of job losses and deteriorating home values, Wall Street is backing McCain's Democratic rival, Barack Obama with cold, hard cash.

McCain plans to extend the Bush administration's tax cuts, eliminate the Alternative Minimum Tax, and slash corporate taxes. Obama, who has derided the Arizona senator's plans, has pledged to raise taxes on the wealthy and introduce a broad range of refundable tax credits.

"My personal opinion is I would argue that McCain is probably the better candidate for the economy and that is more or less because of his tax policies," James Caron, head of global rates research at investment bank Morgan Stanley in New York, said at the Reuters Summit this week.

"In this environment that we're in right now, the last thing you want to have is higher taxes and taking money out of the consumers' pockets," he added.

David Bianco, chief U.S. strategist at UBS Investment Research, told the summit that Wall Street would welcome McCain with open arms. "My view is that McCain is better for the market," Bianco said.

"The market will respond to McCain corporate tax cuts," said participant Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.

Wall Street may like McCain but it is betting on the Democratic senator from Illinois.

The securities and investment industry has given more campaign contributions to Obama than any other candidate, totaling nearly $7.91 million and exceeding McCain's $4.15 million.

And Corporate America as a whole likes the Democrats.

For the first time in a generation, most major U.S. business sectors are donating more campaign money to Democrats than to Republicans, according to a political fund-raising watchdog group.

Six of 10 business sectors tracked by the Center for Responsive Politics had given more money to Democrats as of late April in all federal races, marking a shift over the past year with profound implications for Republicans.

That said, prominent Wall Street economist Henry Kaufman said it is too soon to formulate who would move the economy in the right direction.

"Both of the two candidates thus far have not expressed in detail their financial and economic programs," he said.

But Kaufman, president of financial consulting firm Henry Kaufman & Co, quickly added: "I was a little bit dismayed when Senator McCain said flippantly that he does not know too much about economics but carries Alan Greenspan's book under his arm. That does not encourage me."

All told, U.S. stock markets will do well regardless of who takes the White House, one strategist said.

"It is worth noting that in every presidential election year since World War Two, the S&P 500 has posted a gain in the fourth quarter, as the uncertainty surrounding the outcome of the election fades, with the only exception being 2000," said Jeffrey Kleintop, chief market strategist at LPL Financial.

In 2000, the result of the White House race between Republican George W. Bush and Democrat Al Gore was uncertain for weeks.

© Thomson Reuters 2008. All rights reserved.

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