NEW YORK — As President Barack Obama widened his lead over Mitt Romney in polls this month, traders at hedge funds and investment firms began shooting emails to clients with a similar theme: It’s time to start preparing for an Obama victory.
What many in the market worry about isn’t that high earners may pay more in taxes if Obama wins. They worry that federal spending cuts and tax hikes scheduled for 2013 will kick in on Jan. 1 and start pulling the country into another recession. The higher taxes and lower spending would total $600 billion. They take effect automatically unless Congress and the White House reach a deal before then.
If he’s re-elected, Obama will still face a House of Representatives controlled by Republicans the rest of the year. And the new Congress that takes office in January may have a Republican House, too. Investors says that’s likely to set up a budget battle similar to August of last year, which ended with the country losing its top credit rating and panicked investors fleeing the stock market.
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