Monday, October 29, 2012

Stocks & Politics

The S&P 500 is up 10.5% since June 1. Some commentators say that this rally predicts that Obama will win. Presumably, higher stock prices reflect an improving economy, which should benefit the incumbent. September’s unemployment rate did fall below 8.0% to 7.8%, the lowest since Obama came into office. October’s employment report will be released on Friday, and is expected to show a slight rebound in the jobless rate.

If Romney wins, will that be bullish or bearish for stocks? In the 10/25 issue of BloombergBusinessweek, Charlie Rose interviewed Jeremy Grantham, who sees trouble for stocks if Romney wins: “History speaks pretty clearly that the markets do better with Democrats. Republicans’ ideas of what constitutes fiscal responsibility simply are not good for the stock market. Democrats have many tendencies, but one of them is to look after the workers, and actually that tends to be good for demand and good for markets. These capitalists who are desperate to elect Republicans should study their history books.”

I’ve looked at the history of the stock market and the political cycle. I don’t see any reliable pattern relating the market’s performance to which party is in the White House or has majorities in both the House and the Senate at the same time.

Today's Morning Briefing: Big Storm Coming. (1) The storm before the cliff. (2) Will Sandy favor Obama or Romney? (3) Why Romney will win. (4) Why he might not. (5) Romney/Biden in 2013? (6) Grantham says Democrats are better for stocks than Republicans. (7) It ain’t necessarily so. (8) Apr├Ęs le deluge, la descente? (9) Charts for bulls. (10) Consumers didn’t get the memo about the cliff. (More for subscribers.)

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