Investing in an Obama World

January 8, 2009

The New President's Plan

For his part, President-Elect Obama understands the magnitude of the crisis and isn't wasting any time. Early today, Obama made a major speech outlining his plans to get the economy back on its feet. This is exactly the time when prudent investors should be paying close attention to the details. Remember: What happens in congressional subcommittees in the spring will surely be reflected in stock prices in the fall.

I have to say that I'm impressed that Obama's plan is so ambitious. Today he said that his goal is to invest heavily in key sectors like health care, energy and education. Although we don't know the exact details just yet, his advisors say that the price tag will be between $675 billion and $775 billion. I should also add that one of Obama's top economic advisors is none other than Paul Volcker, the man who's most responsible for defeating inflation 25 years ago. What I especially like about Obama's plan is that 40% of it will be in the form of tax cuts.

Now let's take a closer look at what Obama's plans will entail and the stocks that will benefit from his main initiatives:

The Obama Economic Agenda

The top item on Obama's economic agenda is a middle-class tax cut, or as I like to call it, the Wal-Mart (WMT) tax cut. The President-Elect wants to offer a tax cut of $500 a year for individuals and $1,000 for couples.

The tax cut will be in the form of a payroll tax credit so it will hit the economy quickly. That's a smart idea. Here's the key: The tax cut will only be available to taxpayers below a certain income level, and these are the folks Wal-Mart knows best. Best of all, the credit will also be refundable. That's another key because it means that taxpayers who have zero tax liability, which is often lower-income workers, would qualify. This item will be a major boost for Wal-Mart's business. Though the company had a disappointing sales report today, I currently rate the stock a strong buy and have high hopes for this stock in the first half of 2009.