Just Let It Be Over

This past Tuesday, October 22 marked the two week countdown until election night. It happens in every election cycle, but I am sure we are all suffering from Election Rhetoric overload. From the ads saturating our senses with alleged facts that are in most cases are fiction to the rigid, scripted debates and to the campaign spokespeople who in most cases continuously wizzed on our legs and told us it was raining….we all will just be glad when November 6th comes and goes. This past Tuesday, I came into the office and received an email from a salesperson friend who makes his living selling hospitality to corporate clients. The email contained the quote from a potential client that he had met with. The decision maker stated, “We have cut all discretionary spending until the economy turns around and this election is over and we have a new president.”

As a small business owner, I reflected on that statement. As a company, we made the determination to make a long term purchase in 2012. That investment was hiring a new staff person. John and I wanted to wait until 2013, but our waiting would have continued to weigh down our staff performing some duties that were not conducive to furthering the profitability for our clients and our firm. For us, we just couldn’t wait.

However, considering the continued weak jobs data, I think most business owners passed on hiring last year. With unemployment still around 9% and less than 150,000 jobs on average being created each month, most employers are trading corporate growth for increased productivity with their current staffs. They seem to be more concerned on waiting out the election.

Who can blame them? Let’s look at the unknowns. We have a mandated ObamaCare Act that even our own Congress has not even read primarily because it won’t impact them with and their Rolls Royce coverage. What will this healthcare cost that small business owner? What will your tax bracket and capital gains rate be next year? If you make over $250,000 and Obama is re-elected, both will be much higher. Regardless of your tax bracket, capital gains rates will increase for almost all investors.

Besides these uncertainties, the lame duck Congress will be forced to make budget compromises in the weeks following the election or our economy will go over Niagara Falls in a pickle barrel. The consequences will be dire for our fledgling economy and undoubtedly will send us back into recession. Unemployment will increase, markets will fall, and panic will be the norm.

Not surprisingly, the US Business Confidence Index, according to the Institute of Supply Management, shows confidence to be at 51.5 on a scale of 100. Any number below 50, means businesses believe their earnings will be less next year than this year’s. During the Obama administration, the high water mark for this administration was 61.2 during the 2009 recovery and the low point was last month was 49.6. So, current levels show that owners are in total “wait and see” mode.

The broader question is “if Obama is re-elected, what will change so that business owners like the one who emailed my friend will make investments in their company’s growth?” Considering the current malaise that all small business owners seem to have, I wouldn’t be too optimistic with status quo. Talk to your advisor about what this all means for your portfolio and if you are already a client of ours, you know where we are headed.

Get out and vote as they did in Chicago…. “early and often.”

 

Source: United States Business Confidence. Tradingeconomics.com. October 24, 2012.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.