Can President Elect Obama Wave His Wand On The Economy?

The election is over and Barack Obama ran an unbelievable campaign. His victory is clearly historic and change is on its way. Yesterday we had the relief rally that the Bush Administration is leaving but reality will start to set in. President Obama is going to effectuate change but how quickly can he make housing prices rise or businesses earn more money?

Our new President can help in the short-term if he boosts consumer confidence but the American people still need to go home and look at their bills, their shrunken net worths, and their declining incomes. Our country may feel better about itself today as we can move beyond the worst Presidency of all time but the United States is buried with debt and all the new loans the federal Reserve and the Treasury have proposed or put in place will create an arduous task for our new President.

Can China's growth continue to bailout the negative growth in the rest of the world? Unlikely, as one big surprise for 2009 will likely be that the China engine slows down. This only means it will take a long time to deleverage all parts of the economy and it may be a painful process. The markets can now focus on the future and volatility may reappear. In the next two months, some investors will sell stocks to minimise capital gains taxes which will put pressure on the markets. It imperative that Mr. Obama quickly back track on 2009 tax increases or we are in for a period of weaker stock prices and poor economic times.