OPINION: An Obama Market Crash? Not Likely

I recently received an email from a reader expressing concern over Sen. Barack Obama's (D., Ill.) plan to hike the capital gains tax -- perhaps as high as 28%. This reader wrote: "Obama's capital gains tax hike will hurt ALL of the stock market/investment -- and that means the value of your IRA will go down."

Some Wall Street pundits agree with this reader's thinking. CNBC's Charlie Gasparino, in a New York Post column titled "Wall St. Death Wish," wrote:

"Still, it's hard to see how a President Obama would be good for Wall Street. He wants to raise the capital-gains tax to a whopping 28 from the current 15 percent. That'd be great for the tax-shelter business, but stocks would tank."

There you have it -- a call for an Obama crash. Sell the calls and buy the puts, everyone.

Gasparino predicates some of this theory on the investment returns during Bill Clinton's presidency, particularly his first three years in office. In Clinton's first year in the White House -- 1993 -- the Dow Jones Industrial Average ended up 453 points, a 13.7% gain. His second year saw a nearly flat market, up just 2.1%. In his third year, the Dow exploded to the upside, adding 1282 points for a 33.5% gain. The last year of his first term -- 1996 -- saw a 26% rise in the Dow Industrials. Those are very good rates of return over a four-year period.

Clearly, 1994 was the worst year for the market under Clinton's first term. Chip Hanlon, president of Delta Global Advisers and a RealMoney.com contributor, remembers the market. He recalls, "1994 was a really difficult year for the stock market, and the bond market got killed. The market suffered under the effect of higher taxes and the specter of Hillarycare."