WSJ.com is available in the following editions and languages:
Thank you for registering.
We sent an email to:
Please click on the link inside the email to complete your registration
Please register to gain free access to WSJ tools.
An account already exists for the email address entered.
Forgot your username or password?
This service is temporary unavailable due to system maintenance. Please try again later.
The username entered is already associated with another account. Please enter a different username
The email address you have entered is already in use.Please re-enter the email address.
From time to time, we will send you e-mail announcements on new features and special offers from The Wall Street Journal Online.
Create a profile for me in the Journal Community
Why Register?
Privacy Policy | Terms & Conditions
As a registered user of The Wall Street Journal Online, you will be able to:
Setup and manage your portfolio
Personalize your own news page
Receive and manage newsletters
Receive and manage newsletters
Keep me logged in. Forgot your password?
What if I told you that the year-end value of your 401(k) would be determined by a special Congressional election in the icy barrens of upstate New York?
It seems pretty far-fetched. The current market capitalization of the U.S. stock market is around $12 trillion. Only 650,000 people, less than 0.2% of the US population, live in New York's 23rd district.
Nancy Pelosi's continuing reign over the House is assured whether or not Conservative candidate Doug Hoffman beats Democrat Bill Owens in NY-23.
So why should you or any investor possibly care who wins in this obscure contest? Do politics really matter to the stock market?
In the past, the answer would have been it doesn't. Historically, the performance of the stock market didn’t neatly correlate with the Republicans or Democrats in power.
But today, in the age of USA Inc. – politics matter a lot to the stock market. You cannot have the U.S. government control Fannie Mae, Freddie Mac, AIG, General Motors, Citi and Bank of America – all the while injecting hundreds of billions of tax dollars into the broader financial system - and think otherwise.
So consider the bullishness that could be created by a possible Republican sweep in today's big elections. Republican Bob McDonnell is expected to easily win the Virginia Governor's race over Democrat Creigh Deeds. Republican Chris Christie might eke out a victory over incumbent New Jersey Governor Jon Corzine.
And those elections alone would probably be good news for stock market investors, who lean Republican. Of course, the losses could be dismissed by the White House as a mere reflection on the defects of Deeds and Corzine.
But the race in NY-23 would be harder to dismiss. Last autumn, NY-23 was a district that candidate Obama handily won. But now it's a district that rejected Dede Scozzafava, the Republican Party pick, as too liberal. A win by Doug Hoffman, a Lake Placid accountant, may signal a comeback for anti-government Reaganism.
Now, the Democrats may not buy that, but they're certainly not treating the upstate race as inconsequential. Yesterday, Vice President Joe Biden was hoofing along the Canadian border campaigning for his man, Bill Owens, a Plattsburgh lawyer.
That’s why it's hard to think of something more immediately bullish for the stock market than a Republican sweep of the three big elections.
It's not because investors dislike Democrats. It's because investors believe that having saved the economy from collapse, Washington now finds itself with an unprecedented amount of power over US businesses. And they believe that the unrestrained exercise of this power by Washington is hurting both businesses and the economic recovery.
Now, no one can empirically prove that Democrats are bad for the stock market. Just look at the market rally since early March.
But go ahead and ask investors to buy healthcare stocks after listening to Nancy Pelosi or Harry Reid rail against Humana. Or ask investors to put new money into the market after watching the White House pick a fight with the U.S. Chamber of Commerce. It's a pretty tough sell.
And as the rally approaches year-end, it's gotten even tougher. In spite of strong third quarter corporate profits and a better-than-expected GDP number, there have been jittery sell-offs in three of the last four trading days.
It's almost as if the market wants to go higher, but is too afraid — afraid of the pace of recovery, afraid that the Democrats may still jam all their big government legislation through Congress.
That's why a big defeat for Democrats may be a big win for the U.S. stock market. Investors are always looking for market inflection points — and in today's elections, they may just get what they're looking for.
StumbleUpon
Digg
Yahoo! Buzz
Fark
del.icio.us
MySpace
Error message
“It's not because investors dislike Democrats. It's because investors believe that having saved the economy from collapse, Washington now finds itself with an unprecedented amount of power over US businesses. And they believe that the unrestrained exercise of this power by Washington is hurting both businesses and the economic recovery.”
Read Full Article »