7:47 AM
By Edward Krudy
NEW YORK | Tue Oct 12, 2010 10:33am EDT
NEW YORK (Reuters) - Wall Street is more worried about high unemployment than the makeup of Congress or the Federal Reserve's next move, according to views from the market ahead of next month's election.
That said, extending tax cuts and lifting growth should be the top priorities of the new Congress, according to a Reuters poll of 53 financial analysts, money managers and trading firms.
Repealing the recently-passed financial regulation law was less of a priority for Wall Street. Just three of 53 respondents said scrapping the bill should be one of two top priorities, despite months of vocal opposition.
The poll shows Wall Street has lower unemployment as by far the most important factor in improving the business climate, followed by increased consumer confidence. Those two factors trounce more Fed action and even a stock market rally.
The U.S. economy endured an 18-month recession ending in June 2009, the longest since the Great Depression, but growth since then has been anemic despite attempts by the Obama administration to stimulate the economy through a combination of spending and tax breaks.
The latest Reuters poll of economists shows expectations for a meager 1.8 growth rate for gross domestic product in the third quarter and 2.1 percent in the fourth quarter.
"If the bills and the policies which had been promulgated by the Obama administration had produced extraordinary growth in our economy, I don't think we'd be having these conversations about the mid-term elections ... that is the overriding theme," said Dan Ripp, analyst at Bradley Woods & Co in New York.
All seats in the U.S. House of Representatives and 37 seats in the Senate are up for grabs in the midterm elections. Both houses are currently held by Democrats.
Expectations are for the Republicans to win at least the House. Some say the market has built in such expectations in its recent September rally, and two-thirds of respondents say the market will rally at least modestly if Republicans win one House.
A mid-September Reuters/Ipsos poll showed Republican voters are more enthusiastic about the coming election.
Such an outcome would give Republicans more power and make it harder for Democrats to push their agenda.
TAX BREAKS WANTED
In a question about which two issues the Republicans should focus on after the elections, nearly two-thirds of respondents said extending President George W. Bush-era tax cuts should be a priority, while more than half said boosting economic growth should take top priority.
Democrats have said they want to extend tax cuts for the middle class but let tax rates revert to higher levels for those making at least $250,000 a year. Republicans want tax breaks extended across the board. All the tax breaks will expire at the end of the year without action from Congress.
Just over a third of respondents pointed to reducing the budget deficit as a key factor, while more than a quarter wanted Obama's signature healthcare overhaul repealed.
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