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| John Ryding |
Who will win the election? The advantage is with President Bush, but there's a lot of uncertainty in the polls.
What impact will it have on the bond market?
The most important thing is who will be the next Federal Reserve chairman. When it comes to other things the bond market could care about, such as the deficit, the currency policy and the regulation of the government-sponsored enterprises, I suppose conventional wisdom has it that Sen. John Kerry is seeking a tax increase. Since [former Treasury Secretary Robert] Rubin is a close advisor of his, Kerry might be more fiscally conservative. With Kerry's association with Rubin, he might have more emphasis on the dollar policy and one of the most powerful influences on the bond market has been foreign central buying.
The one clear thing about Bush's policy is that he clearly prefers a lower tax rate on capital. A Bush re-election is likely to be more equity-positive than a Kerry win, which would bring attendant uncertainties. And if you look at how the hearings have gone, the assumption is also that a Republican president will be tougher on the GSEs.