John J. Edwards III chatted on AOL MarketTalk, Monday, Oct. 23 at 3:30 p.m. EDT.

OnlineHost:

Live from New York, N.Y., please welcome John Edwards, assistant managing editor, for

TheStreet.com.

John can answer questions about the latest market-moving news. John does

not

offer individual stock commentaries or recommendations. Visit Keyword: TheStreet.

SageMoola:

Good afternoon and welcome to MarketTalk, Mr. Edwards!

TSCNYJohnE:

Thanks for having me. As always, great to be here!

Question:

Has the recent bout of better-than-expected earnings sparked the traditional end-of-the-year rally?

TSCNYJohnE:

Well, it's still hard to say how much of a rally this will turn out to be. I don't think we'll see the Nasdaq finish in positive territory for the year, nor will the Dow. And while I think the downside may be contained to the lows we've seen already, I don't expect very meaningful upside. Valuations remain stretched throughout much of the tech market, despite the declines we've seen.

Question:

Is Gore good for economics?

TSCNYJohnE:

Much of Gore's potential effect on the economy would depend on the composition of Congress. If he's elected and both houses, or just the House, become Democratic, there might be a spike in spending on domestic programs that could have a deleterious effect on federal finances.

That would be balanced, however, by avoiding big tax cuts that could also be fiscally irresponsible in the long run. Some have argued that the best outcome would be essentially a continuation of the status quo, electing Gore while maintaining a Republican Congress.

Question:

Will there be any major changes in the income tax code in the next 2 years that will affect the stock market in a major way? Thanks.

TSCNYJohnE:

Much depends on who's in the presidency and who controls Congress. Certainly, if there's a Bush administration and a Republican Congress, we can expect to see large-scale tax cuts that might initially serve to stimulate the economy but would run the risk of derailing the federal fiscal discipline of the last several years. Gore's tax plans are more modest, involving targeted tax cuts meant to aid families seeking to put kids through college, for example. As far as stock-market effects, enactment of the Bush plan might send stocks higher in the near-term, depending on what kind of tax breaks corporations would receive. I imagine the Gore tax plans would have little market effect in and of themselves.

Question:

With Christmas coming do you feel retail stores, clothing, technical items etc., will have a good 4th quarter?

TSCNYJohnE:

It's unclear just how good the fourth quarter will be for retailers. Just as the wealth effect -- investors feeling wealthier because of paper gains in stocks -- boosted spending in the last few years, the reverse wealth effect of this year's stock declines might dampen enthusiasm. High energy prices will be squeezing homeowners directly, as well, which also might trim spending. There will probably be year-over-year gains in retail spending, but probably not dramatically so.

Question:

Do you believe in less tax cuts and more federal spending, like Gore has proposed?

TSCNYJohnE:

Personally, I think the most fiscally responsible course would be to balance targeted tax cuts, rather than across-the-board tax cuts, with prudent (not necessarily higher) federal spending. Deficit reduction has been an important part of our recent prosperity, and I don't think we ought to jeopardize that by relying too much on rosy forecasts of future surpluses.

Question:

What do you think of the defense industry and what do you like in it?

TSCNYJohnE:

That's always a tough industry to see a lot of upside in. As with many things lately, a lot depends on the election outcome. The Republicans would likely favor more military spending than would the Democrats. Your best bet might be to do some research and determine what defense companies might be in play as consolidation continues in the industry.

SageMoola:

Thank you very much for joining us today, John! Have a wonderful week!

TSCNYJohnE:

Thanks very much! This has been my last chat for

TheStreet.com

, and I've really enjoyed all of your questions over the last couple of years. Best of luck with your investments, and keep reading

TheStreet.com

!

SageMoola:

Good luck, John!

TSCNYJohnE:

Thanks!