For many young folks in the USA, today is the scariest day of the year. It is also the day many older folks dress up to transform into their fantasy image, ya know the Greek goddess or the extremely rich sultan of whatever. Mostly, though, today is a fun day for lots of people, young or not. For market players, it is the last day of the month, and sometimes that is scary and not so fun. The market today is showing signs of being afraid. What is hiding under the bed? Ooooh …
This particular end of the month is rich with consternation for many on both sides of the political spectrum. For many, though, I do believe this day and every day right up to the US presidential election is outright scary. The election carries with it such uncertainty and folks harbor such passion for their ideologies, I think some actually lay awake at night thinking about how horrible it will be socially, culturally, economically, and for the market if one or the other wins the election. If anyone were to ask me, though … Oh wait, someone just did …
- Do you have any theories on how the coming election might affect the market?
No, I don’t have any theories on this, but I do have some thoughts …
This week (what’s left of it) before the election, I believe the market will chill, perhaps even retreat a bit. The fact that good economic data did not move the market strongly last week suggests it is not interested in taking on much risk. The fact that this week has lots more economic data coming out speaks to even more risk aversion.
Let me see … We have PMI data all over the place, more consumer sentiment data, construction spending data, oil inventory data, ADP employment data, and, oh yes, the US employment numbers for October. It is a big week for data, and it all comes just before the election.
As to after the election, well, that is another story, a story that is causing even more uncertainty for the market. Mind you, taxes are going up no matter who is president. Will the capital gains and dividend rates rise? That is a big question for market players and if the market senses this will happen (if Obama is reelected), we might see a year-end fire sale. If the opposite happens (Romney wins), there is no guarantee capital gains and dividend rates won’t rise, but the sentiment will be the rates are safer, so no major fire sale.
As to anything else, the market will wait to see what Congress does in the lame-duck session with the fiscal cliff and the US debt before it makes any rash leaps. More of what we have seen for some time now – uncertainty, at least to the end of the year.
In the end, I don’t think it matters to the market who is elected president. The market understands the problems we face are beyond a single person. It will take collective effort of will and bipartisanship to fix what ails the US. Practicality needs to replace ideology if we are to fix our problems, no matter which man is elected. Either that man will have a Congress interested in working with him or he won’t. The market understands this and so we wait to see …
Trade in the day; Invest in your life …
