Politics and Stocks
Over the weekend, during the neighborhood poker game, one of my neighbors expressed what I think is a common, yet strange to me at least, sentiment: how could the stock market be doing so well when a) the economy stinks, and 2) we have an uncertain, messy election coming up?
That's easy. First, the economy doesn't stink. You could be forgiven for thinking otherwise if you read the MSM papers and watch the MSM news, where the two main themes of negativism on the economy come in two forms, things that are meaningless and things which haven't happened. In the first category you have economic hobgoblins such as the trade deficit and income inequality. In the second you have a housing crash-induced consumer spending slowdown leading to recession. In reality, by nearly every account the economy is in fine shape, and the stock market knows this.
Second, the stock market is predicting Democratic gains in the House and/or Senate, which will lead to two years of the gridlockiest gridlock. That's good news for stocks. For further analysis of the economic growth/stock market outlook of the election, let's turn to Don Luskin.
That's easy. First, the economy doesn't stink. You could be forgiven for thinking otherwise if you read the MSM papers and watch the MSM news, where the two main themes of negativism on the economy come in two forms, things that are meaningless and things which haven't happened. In the first category you have economic hobgoblins such as the trade deficit and income inequality. In the second you have a housing crash-induced consumer spending slowdown leading to recession. In reality, by nearly every account the economy is in fine shape, and the stock market knows this.
Second, the stock market is predicting Democratic gains in the House and/or Senate, which will lead to two years of the gridlockiest gridlock. That's good news for stocks. For further analysis of the economic growth/stock market outlook of the election, let's turn to Don Luskin.
posted by Donny Baseball at 9:43 AM
2 Comments:
I think the market wants the Republican party to lose this fall. It likes what's hapening in the polls. The market is just twisted like that. The Republican party has only itself to blame. Power corrupts....
What if the Democrats failed to gain majority seats this Nov.? Would the market go down?
Like I said I think the market is predicting gridlock, and specifically, I think the market sees a Dem House and a Repub Senate, so that the dangers of a Dem House (say the words House Ways and Means Chairman Rangel) are mitigated. I think this jibes well with the good sense of the American people, who want to see the Repubs deservedly smacked down but want to leave room for progress where it counts, say for example in a 3rd Bush SCOTUS justice appointee.
I don't know how the market will interpret Repubs holding congress. It could see either 1) a scared-straight majority ready to actually live up to their principles or 2) Repubs whose arrogance and buffoonery did them no harm and thus likely to act the same. That's a tough call.
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