The premise is flawed. Wall Street is not overwhelmingly supportive of Republicans over Democrats as seems to be commonly believed. The most well-known Wall Street banker in today’s world is a well-known Democrat: Jamie Dimon, CEO of JPMorgan Chase. It’s well publicized that Democrats outdrew Republicans in donations from Wall Street in 2008 and that many of Obama’s largest donors were banks and their employees in 2008. While there was a shift toward Republicans in 2010 and likely Republicans will outdraw Democrats for the 2012 elections, there will be significant donations to members of both parties from the major banks and their employees.
Of course a reduction in government spending will result in a decline in GDP, which will negatively impact financial markets in the short run. However, just as obvious is that we shouldn’t spend just to temporarily increase GDP. There are diminishing returns of more and more stimulus, much of it is wasteful spending, and it is debatable that it generates even a 1 to 1 return on the money spent. If government spending was so great and we get such a great return on our “investment”, why not increase the stimulus to ludicrous levels? If an additional $1-2 trillion stimulus is great, why not $10 trillion? Why not $50 trillion?
It is safe to say that what businesses want the most is stability and predictability. Whether or not you consider it the fault of Republicans or Democrats, the government has been a complete clusterfuck the past few years. Things like the debt ceiling crisis, government shut-downs, what to do about expiring tax cuts, what taxes to raise, huge legislative programs like healthcare insurance reform and attempted cap-and-trade, poor regulatory reform like Dodd Frank have immensely hurt the economy. Bowles Simpson recommendations should have been enacted.
Personally I think that whoever controls the Senate is usually not too bad (they at least act like grown ups most of the time and aren’t complete buffoons), the House is always run by a ridiculous group of idiots, and while Obama has been better than Bush, he has still been an immense failure. Also, most of the improvement that Obama has been over Bush has been in foreign policy (while not great, almost indisputably better than Bush) and in social policy (for those that are like minded). He has probably been worse in domestic policy, and I considered Bush a total failure.
Does anyone really blame Wall Street for not being as enamored with Obama as last time around? From a domestic policy standpoint, Romney seems like he would be a step up from McCain, and Obama now runs on a record of failure as opposed to a blank slate. The back-up quarterback is often the most popular guy on the team. We know our starter (Obama) isn’t that great so a lot of people think we should try out the back-up (Romney).