I think so-I am planning to be 100% in stocks by November 1st.
I think that the Republicans taking back the House (and hopefully, the Senate), will make Obama reconsider some of his crazier ideas.
What does history say?
Of course, the USA is enduring one of the worst recessions in history…but I think we need to restart things.
Actually I would kind of think that it might be the reverse. If the Republicans are running on tightening up the Fed pocket, that might worry a lot of investors who expect a double dip.
No.
If you are serious, all I can say is ‘a fool and his money are soon parted’.
They have a chance to take back (with a very small majority) the House…from what I understand, they have nearly no chance of taking back the Senate. And I was reading an analysis the other day that was saying that the Tea Party is actually dimming the Republicans chance of even getting that small majority in the House and pretty much killing even the faint hope in the Senate.
Plus, there is no evidence that the stock market would instantly respond to a Republican victory in either case anyway…even if you assume that the only reason the stock market is down is because of the Dems controlling the House and Senate.
We probably do. I think that our government works best when both parties respect each other, and are willing to talk, to compromise and to work together…and when no one party controls all of the elements of the government (or even just the Executive and Legislative branches)…but, regardless, having the Republicans come in isn’t going to instantly solve all our problems (I’m skeptical that having them in considering the current political climate would solve ANY of our problems…just as I’m not confident having the Dems at the helm is a great idea either. Pox on both houses, and all that).
-XT
It’s possible. As always this is about guessing what Wall Street thinks is going to happen. Do investors think the Republicans are going to win control of just the House, or the House and the Senate? If so, how much in each? How will they react if that doesn’t happen? And - I think this is the part you may be overlooking, ralph124c - what policies do they expect the Republicans to pursue if they get the chance, and what effect do they think those policies might have on the economy? I can imagine a burst of enthusiasm but I don’t think anyone expects things to turn around in a hurry no matter what happens.
Let’s not forget that in early 2009, the markets were weak when Obama took over and the press was happily churning out stories about how Wall Street hates Obama. Then the market started doing better and we heard no stories about Wall Street loving Obama. For the record the Dow is up about 28 percent since his inauguration and the S&P is up about 40 percent. They’re both about flat this year, though.
Republicans win midterms, stock market goes up: Republicans claim credit.
Republicans win midterms, stock market doesn’t goes up: Republicans say nothing.
Republicans lose midterms, stock market goes up: Republicans say nothing.
Republicans lose midterms, stock market doesn’t goes up: Republicans blame Democrats.
That’s how I see it happening.
This is the key. If you think that the markets will do better than 14% and 20% per year under a GOP congress, then more power to you.
Market fundamentals and economic growth/employment will have a much, much larger impact on stock market prices than who controls congress.
And what “crazy idea” do you think will be “reconsidered” by a GOP takeover? Health care won’t be repealed. Finreg already happened, and won’t be repealed. Cap and trade is about the only economic policy I can think of that will even be on the table. Tax cuts will expire until the GOP comes to terms with something Obama will sign.
Also, 100% equities is almost always a bad idea, even with debt as cheap as it is currently.
Your other question was “what does history say”. Here is one answer:
DJIA:
Nov 1994: 3,908.12
Nov 1995: 4,755.48
That was 21.6% ROI if you bought just prior to the GOP landslide of 1994. What percentage of that you credit to the GOP is up to you. One could counter with these numbers:
DJIA:
Nov 2006: 12,080.25
Nov 2007: 13,924.16
15% ROI after a Democratic takeover in 2006. Undoubtedly you will give that credit to Mr. Bush and the GOP minority.
What would a ‘Republican landslide’ look like in any case? I picture a bunch of Republicans tumbling down a steep mountain slope with a bunch of horror struck citizens at the bottom looking for places to run…
-XT
One could argue that any change in the control of the government, or indeed any election, should be associated with an uptick in the stock market, since the very fact that the winners won implies that more people think they’ll do a good job than think they’ll do a poor job.
One could also argue that current stock prices already account for the probability of a Republican takeover, and that there’s really nothing you can gain by trying to time your stock picks.
In other words, if the market thinks a Republican win will help stocks, and if it thinks the Republicans will win, then that information is already priced into stocks. Even if they think Republicans will be a disaster, THAT information should also be reflected in current prices. So the only way you’d see a huge change on election day is if there is a wildly unexpected result.
Now, if markets believe Republicans will be good for stock prices, the prices would certainly go up after election day if Republicans win - but only by the amount that reflects the change from a probability of Republican control to a certainty. Again, there’s no ‘edge’ to be had here, unless you’re just gambling with your money.
The other factor, if you believe that Democrats are bad for the market, is that they’ll still control everything until January. It’s possible that a big blowout could cause them to decide to ram through a bunch of legislation in a lame duck session before they lose power. And the markets could already be discounting that.
Democrats, feel free to exchange the word “Democrat” for “Republican”. The same points hold. This isn’t a partisan analysis. It’s all about how markets process information including future event probabilities.
In short, an individual investor can’t really hope to play the market in this way.
When Bush blew up the economy, the market crashed. The full effects were felt in March 2009 when it was at 6593. Today it is a 10554. Who has been president during that time?
A list, please. The only crazy ideas I’ve been seeing the last two years have been Republican ones.
Plotting election dates along a 5-year Dow or S&P 500 graph pretty much gives you nothing. The big plunge began around the end of 07’, we hit rock bottom in Feb of 09’ and it’s been slowly climbing out ever since.
It’s hard to correlate any significant partisan control changes with market flux.
Summary: History does not support GOP claims of being good for business. Obama is still a deficit spending lightweight compared to Bush II, and not even in Ronald Reagan’s league. Turn off the FoxNews.
Which as Sam pointed out is as it must be, since the market already knows this data. If there were any pattern, the market makers would have already moved on it. There can be no obvious time-price correlations with something as dramatic as an election without it already being price in.
Imagine that every time the GOP picked up a Senate seat the data showed markets went up 1% over the next month. Every investor with access to this data (a huge number) would buy before the election, raising prices up by (at least) the 1% expected.
Siince Republicans control the money at the top, it stands to reason that knowing they were going to get their free rides back, they’d start “investing” again.
Other way around there. And the dirty little secret is that the money at the top controls them all, not just the Republicans.
And the Democrats managed to get elected without any money? Amazing!
-XT
Well, the entire economy went klablooey from 2000-2006 while the repubs had control of the house, senate and presidency. So, if you want to go by history, then the stock market will go down. You should also not try to buy a house. Also, forget about having any draft-age kids. Try to get them into Canada. But, they’ll have to walk since gasoline prices will probably triple or quadruple. Oh, and if they’re in a sanctioned school, you might as well give up any hope of them ever entering college.
It’s not often I’ll say this in GD, but that was an excellent post, Sam Stone.