It was believed that the markets had “priced in” a President Obama re-election in its current prices, but Marc Faber, editor of the “Gloom, Boom and Doom Report” said that was not the case, and Wednesday’s huge sell-off can be easily attributed to the president’s re-election – mainly due to his tax policies, the impending “fiscal cliff” and the current slow recovery.
In a phone interview Wednesday on the Fox Business Network, the investment expert posed a pessimistic tone for market investors going forward, predicting that I think from the peak the market will drop at least 20 percent. I think we will revisit the lows of June at 1,266 on the S&P.”
There are several reasons for his pessimism, he went on to say. “I’m not surprised the market is selling off because technically the market was weak already for a couple of months and we are in a downtrend and Mr. Obama’s economic policies are obviously not very good for an economic expansion.”
Faber disagreed with the Obama re-election “price-in,” based on anecdotal evidence. “I think among people who are investors, the reelection victory of President Obama was actually a surprise because I have so many friends who are Republicans and who are investors and they were betting on Mr. Romney. So I think for some people it is actually a surprise.”
Faber also cited the impending new regulations and taxes that were coming from Obamacare, as well as the increase in capital-gains tax rates in January as being a signal for some stockholders to take their profits while the rates are lower. He also thinks the “fiscal cliff” – where taxes go up and the government bumps against the debt ceiling again very soon. “Well, in principle I think that actually Mr. Obama is not that bad for reducing the fiscal deficit and continuous monetization and that’s why treasury bonds are rallying. But as I said, he is not good for business so stocks are selling off because the stock market is expecting a hard time for corporate profit and essentially economic weakness, which is reflected in a strong bond market and weak stocks.”