Cart (0)
business newsWhat Health Care Reform Means for the Market
By
Josh Lipton Mar 23, 2010 7:40 am
Strategists fret about the legislation's impact on stocks.
PRINT
 |
|
Over the weekend, Democrats in the House of Representatives scraped together enough votes to pass President Barack Obama’s health-care reform bill. The bill was voted in by 219 to 212 votes, just three more than the minimum 216 votes the Democrats needed to pass the reform.
Obama will sign the bill into law today.
Assessing the bill’s impact on the broader market, strategists have debated how the stock market would react. Dr. Ed Yardeni of Yardeni Research reminds us that CNBC’s Larry Kudlow and Jim Cramer predicted last week that stock prices would drop if ObamaCare was passed because it would raise taxes right away.
Kudlow and Cramer also fretted that Team Obama, chests puffed up by this latest victory, might now also try and punch through other controversial legislation such as Cap-and-Trade for energy and Card Check, which would provide a boost for unions.
Fair enough, but they might also have far fewer friends in Congress come November 2.
Columnist Gerald Seib, writing in the Wall Street Journal, reports that the latest Journal/NBC News Poll posed this hypothetical: If there were a line on the ballot that would allow you to defeat and replace every single member of Congress, including your own representative, would you do it?
Fully half of the respondents said they would.
But Yardeni, writing before the market opened on Monday, noted that investors might be so relieved that the debate over health care is over that stocks might rally. And, indeed, they did.
As of Monday's close, the SPDR S&P 500 (SPY), an ETF with holdings including Exxon (XOM), Microsoft (MSFT), Apple (AAPL), and AT&T (T), was in the green: up 0.54% to $116.59.
Of course, as Yardeni also notes, the reality is that the debate isn’t over: The constitutionality of the legislation is likely to be challenged in the Supreme Court by state attorneys general.
Randy Barnett, who teaches constitutional law at Georgetown University, recently wrote about the questions raised by ObamaCare in the Washington Post.
The primary question to ask, says Barnett, is this: Can Congress really require that every person purchase health insurance from a private company or face a penalty?
Market strategists concerned about ObamaCare’s impact on the broad market, like Jeff Kleintop of LPL Financial, emphasize two worries.
One, they argue, the new taxes are a negative for investors. The legislation, Kleintop notes, imposes a new 3.8% tax on investment income. It also adds a 0.9% tax on wages for those earning more than $250,000, which takes effect in 2013.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
