By Jamison Cocklin
and Burton Speakman
Area business leaders offered mixed reactions Wednesday with most agreeing that uncertainty still looms as President Barack Obama and lawmakers prepare to confront deep spending cuts and tax increases in the weeks ahead.
Similar to the day after Obama was elected to his first term in 2008, U.S. markets sank Wednesday, with most indexes dropping by more than 2 percent, including the Dow Jones, which fell 312.95 points, and the S&P 500, which had its worst day since June.
European markets fared no better, where post-election America was overshadowed by concerns about a bleak economic outlook for the foreseeable future. News there helped bring down U.S. stocks as well.
The Valley’s business leaders and investors kept a close eye on the day’s events.
“We’re looking at least a six- to nine-month period of high levels of uncertainty,” said Tom Picino, fund manager at Diamante Capital Partners in Poland. “There’s going to be a lot of volatility, and we don’t see any dramatic changes coming for the next nine months to a year in domestic or European markets, and we desperately need growth in Europe.”
Congress will have to move quickly to avert more than $600 billion in spending cuts and tax increases set to take effect after the end of the year. Picino and others said the election did little to change the challenges or uncertainty facing stock markets and the economy, which could have a negative impact on hiring and economic growth.
“I’m overburdened with taxation, and now I fear rates will just go higher and gobble us up,” said Jim Colburn, owner of Professional Appliance Service in Hubbard. “We have to pass those on to our customers to a point when they can’t afford us anymore. Now there’s no end in sight.”
But Mekael Teshome, an economist at PNC Financial Services, said that regardless of who was elected, businesses across the country were facing the same circumstances.
“If [Republican nominee Mitt] Romney were elected, some business owners might be a little less anxious,” he said. “But businesses just don’t ramp up hiring on a dime; it boils down to the people walking through the door at the end of the day.”
Teshome said that until Congress resolves the country’s deficit-reduction issues and gives business owners a clear direction and understanding of what they face in the next year, hiring and investment are likely to remain at a standstill.
Brian Benyo, president of Brilex Industries, said he was disappointed in last night’s result and what it means for the role of the federal government in individuals’ and businesses’ prosperity.
“I think business for the most part will survive,” he said. “I think working people will be those who are most hurt by this in the long run.”
There is still a lot of concern for businesses about the cost of health care and how the Affordable Care Act, also known as Obamacare, will cause prices to increase. The increased cost could put some companies out of business, Benyo said.
“It’s a clear attempt to move the costs of health care onto the backs of businesses,” he said.
On the other hand, some market sectors and industries already are benefiting from Tuesday’s election.
Although the auto industry remains concerned about looming tax increases and spending cuts, Lacey Plache, chief economist for Edmunds, an automotive information website, said the conditions that are driving increased sales remain.
“The key question for the medium term is how long this confidence will be maintained in the face of upcoming changes in tax rates and government spending,” she said. “If the fiscal issues get resolved or if progress is being made toward a solution, decreasing uncertainty could outweigh higher tax burdens and motivate spending. But there is also a risk that lower disposable income could restrain consumers once again.”
Michael Van Buskirk, president and chief executive of the Ohio Bankers League, which represents banks across the state, said Obama’s re-election wasn’t a bad thing for the industry.
“We certainly wound up with the same cast of characters, but that’s helpful to bankers in one respect,” Van Buskirk said. “The regulators will remain in place. All the people we’ve been working with means consistency, but it also means that the relationships will be preserved, and we keep those who have reached out to understand the unintended consequences of some of these regulations.”
Obama’s health care law, no longer in jeopardy of repeal, likely will drive up the stock of hospitals and pharmaceutical companies, Picino said.
“But with the fiscal situation where it’s at, we still have a long way to go,” he added.