Jeremy Siegel, University of Pennsylvania Wharton School Finance professor, weighs in on what to watch for after the midterm elections.
Jeremy Siegel: If The Democrats Take Over As President They Might Undo Tax Cuts
I think we also have to look at the size of the victory in the House which is expected the Democrats to take it over I think the expected number of seats is 30 majority after the close of this if it comes about that and the GOP keeps the Senate. I think that’s a reasonably okay outcome even though I think the market would prefer. The Republicans to be able to keep the house. I just don’t think that’s possible. I don’t think the surveys are going to peel off as much as some people think. Yeah I don’t think you know a split Congress isn’t the worst thing. I mean some of the greatest markets we had was in the Clinton the biggest bull market during the Clinton administration. And we you know we had a Democratic president and a Republican Congress there was a split there. I think what what is a little worrisome is if there is a way. Now I’m not saying there is but if we say something like 45 seats majority consensus in. The yeah above consensus and or the Senate you know ghosty even or even democratic. The question is What does that mean for 2020. You know because if the Democrats come on really strong. I mean I’m not worried about undoing the tax cuts in the next two years that’s impossible. You know trumping president but two years from now if the Democrats take over as president and Congress they might undo the corporate tax cuts so you’ve got to worry about 2012 implications for 2020.
Right. Professor obviously everybody knows by now how markets have behaved seasonally in a midterm year or at least the nine months following a midterm. Others argue that the president has essentially front loaded policy in the first two years of his term. And I wonder if you think that seasonality holds up this time.
Yeah and I’m I’m questioning yes. We all know third year presidential election after the midterms is usually a good year. But I do question whether that’s necessarily going to be true because the corporate tax cut has already happened the lowering of the regulation has happened. It’s already built there. Now we’re contending with a tightening fad the aging you know no expansion here that is pushing some limits higher interest rates. I’m you know and if the Democrats come on really strong here I think there’s a lot more uncertainties that’ll make next year not going to be the state where year we usually get in third year presidential cycles.
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