NEW YORK, NY -- (Marketwire) -- 11/09/12 -- A day after President Obama was re-elected shares of financial stocks fell sharply, with major banks leading the way, as investor focus has now been shifted towards the upcoming "fiscal cliff." The Standard and Poor's 500 Financials Index declined 3.53 percent Wednesday. Five Star Equities examines the outlook for companies in the Banking Industry and provides equity research on Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C).
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Obama's defeat of Romney solidified the new financial regulations, which were introduced during President Obama's first term. Steep tax hikes and spending cuts, known as the "fiscal cliff" are set to take into effect for the beginning of next year, unless congress moves to moderate them.
"There was hope that a Romney White House, along with a still Republican House, and perhaps a divided Senate would repeal burdensome aspects of legacy Obama/Pelosi actions that increased capital charges, reduced important fee income, raised compliance expenses, and threatened other revenue aspects of the bulge model," said David Trone, a JMP Securities analyst.
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A majority of Wall Street had backed Mitt Romney in the hopes of easing regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The upcoming "fiscal cliff" has become a major concern for the financial sector now that the U.S. House of Representatives remains under Republican control.
"We see the risk that we temporarily fall over the cliff to be larger than it would be under a Romney victory," Merrill Lynch analysts said. "President Obama has called for tax increases for the upper-income cohort, which the Republicans have resisted. If Republicans do not concede ground on this issue, then the risk rises that Democrats allow the Bush tax cuts to all expire in order to push their own middle-income tax-relief plan."
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