NOW IS THE TIME to try to determine what the rest of the year will look like. For three reasons. First, traders, investors, politicians and executives are back at work, either refreshed or wearied from their summer vacations. Second, as Gerry Baker pointed out in The Times last week, “September is the cruelest month”: since 1929 share prices have declined on average in September by more than any month. Third, to borrow from Don Rumsfeld, there are now things we know we know that we did not know at the beginning of the past summer.
The most important is that we will have to live with a high degree of political and economic uncertainty until we ring out the old and ring in the new. The presidential election on November 4 might, but will not certainly resolve the political uncertainty. Ted Olson, the lawyer who successfully argued George W. Bush’s case before the Supreme Court when all those chads were hanging in Florida in 2000, tells me that armies of lawyers have been recruited by both parties to contest the results in any states in which the vote is very close. And even if the result of the election is clear by the night of the election, we won’t know the shape of the corporate and personal tax structure until the new president meets with the new Congress to haggle over the important details. Corporate taxes might go down (McCain); personal taxes of high earners might go up (Obama); trade unions might be on the march and free trade in retreat (Obama); development of domestic oil reserves and construction of nuclear plants might be stepped up (McCain).
