Whew, I’m glad it’s over. The market sell off today is a gross overreaction. If we had four more years like the last four, the market would record one of the best all time returns for a President in history. Granted Obama took office when the S&P 500 was in the midst of a market crash. That always helps the reference points. But none the less Obama has been relatively very good for stocks. Will that continue?
I see no reason why it wouldn’t. As I’ve stated before, economic growth and stock market returns are nowhere near correlated as the media would make it out to be. The stock market competes for investment dollars with the alternatives out there: bonds, real estate, business opportunities, etc. Right now real estate is surging but not anywhere near the level of mania that would take a serious bite out of investor interest for stocks. Bonds are a safe haven but with rates this low, most serious investors are extremely nervous about putting long term fixed income investments to work. Stocks are still the best game in town. Only a little better today since the market has been selling off.
Taxes on capital gains and dividends are likely to go up but not likely to rise to pre-Bush levels. There will be a compromise. Remember tax advantaged investments like pensions, 401ks, etc are not concerned with that anyway.
Use days like today to buy. Stocks are on sale and I’m bullish about the future. With the risk free rate of return this low and likely to stay low for some time, dividend paying stocks with recession resistant business models offer outstanding value.