Analysts: Wall Street Picks Romney to Avoid Fiscal Cliff, Others Say Election Won’t Matter Much

With Americans casting ballots on the final day of the 2012 presidential campaign, some financial analysts are leaning toward Republican candidate Mitt Romney as the candidate who will boost the stock market and can help the United States avoid the so-called fiscal cliff.

David Rosenberg, chief economist and strategist at wealth management firm Gluskin Sheff, said the former Massachusetts governor would help the stock market because of his plans to cut capital gains and dividend taxes. And, he said, Romney would also help avoid the fiscal cliff because he is viewed as a candidate who will reach across the aisle to compromise with Democrats.

The Fiscal Cliff

No matter who wins the hotly contested race, the next president will be forced to immediately tackle the most pressing domestic problem – the fiscal cliff. The so-called cliff is a series of automatically triggered spending cuts and tax increases amounting to $4 trillion. They are set to launch on Jan. 1. And the consensus is the middle class is going to be sucker-punched unless some quick changes are made.

The purpose of the fiscal cliff was intentional – to give lawmakers on both sides of the aisle a reason to seriously attack the rising national debt. Analysts warn that this could push the economy into another financial tailspin.

What no one knows, however, is whether Congress and the administration can settle such a serious issue with a long-term plan when the two sides have agreed on so little over the previous four years during President Obama’s first term.

For many investors, the fiscal cliff is the biggest concern that comes from this election. However, it’s also something both Romney and Obama avoided in stump speeches.

Some market analysts speculate Romney would be a better choice to avert disaster because he will come in with a fresh approach and is known as a political negotiator. They worry that Congress would not be likely to compromise with the president, who burned a lot of bridges during his tenure.

House Speaker John Boehner (R-Ohio) said no matter who is elected, Americans should expect a “bridge” as a short-term fix. Called the “do-nothing Congress,” this highly polarized group of legislators have not addressed the cliff, some say.

Because a decision about the fiscal cliff must be address before the end of 2012, leaving little time for lengthy negotiations or a sweeping fix, a stopgap measure is the best the country can hope for immediately, Boehner said.

Wall Street and the Presidential Race

Overall, Wall Street investors and traders lean toward the Romney-Ryan ticket, analysts say. Despite the fact the administration did not push back nearly as hard on Wall Street banks as financial critics feel he should have in the wake of their roles in the 2008 housing and economic crises, big bankers feel “insulted by President Obama,” Wall Street Journal reporter Greg Zuckerman said.

Obama was critical of Wall Street and focused too much on healthcare reform rather than the economy. If Republicans do well at the polls, the markets should rally, Zuckerman said.

At the same time, some strategists worry about how the market will respond to a Romney victory, especially given Romney’s pledge not to reappoint U.S. Federal Reserve Chairman Ben Bernanke. In finding a replacement, Romney would likely appoint someone who is more “hawkish” and would take the Fed in a different direction.

The New York Times reported Bernanke would decline a third term no matter who wins. If Obama is elected and needs to appoint a new Fed chairman, it would likely be someone who is more easygoing, analysts say.