Invesra, Invest in your Future

Do you know what the Presidential contenders are saying about taxes? 

We have summarized some of the information on their positions. While this is by no means comprehensive, it is a  side by side comparison of the candidates’ basic views.   The Candidates and Taxes

Regardless of who gets elected, the inherited economy for the next President will challenge even the brightest  mortals as they use fiscal and monetary tools to unwind the consequences of the subprime mess and at the same time, prevent the economy from inflating. The looming national debt creates more issues that will not easily be corrected. 

The capital markets are reacting with a great deal of volatility to the recession that may have arrived today or will wake us up tomorrow. According to Bill Gross, manager of the largest fixed income mutual fund in the world, the policies that are being put into place to prevent a recession will  be of little consequence. In his latest written commentary for February, he writes, “To provide a stable recovery path, government spending needs to fill the gap – not consumption. Public works programs, badly needed infrastructure repairs, as well as spending on research and development projects should form the heart of our path to recovery.”  For more reading from the guru of interest rates and economic outlook, go to Read the full article here.

The January effect is when stocks begin the year with a rally.  Sadly, there was no January effect for 2008. The U.S. equity markets started the year with a 10% sell-off  through mid month.  Things were looking bleak for investors as the economic reports were gloomy: GDP’s paltry 0.6% growth rate,  weak retail results, and soft employment data.  

With recession looking more and more likely, the Fed took an aggressive posture with a 75 basis point rate cut on January 22nd and again another 50 basis points on January 30th. 

The Fed’s action sparked a rebound from those mid-month lows, but the S&P 500 still ended January with losses across the board.  Financial stocks posted gains as these were immediately boosted by the Fed’s actions.  In particular, banks and REITs gained for the month. 

Technology stocks were hurt and one of the main drivers was Apple which fell over 31%. But Apple’s decline is a mere fraction of this past year’s increase, which resulted in its market cap exceeding that of both Citigroup and IBM.  

The other news is that Congress put party lines aside to approve the President’s $150 billion fiscal stimulus package aimed at putting money back in the hands of the consumer.  The Senate now needs to approve the package. This also helped boost the markets higher at month end.

So far, 2008 has been bumpy ride for investors. Fasten your belts.