It is election season and the market doesn't like it.
The stock market rarely does well during a Presidential Election Campaign, particularly when the outcome of that election is in doubt. The more divisive the rhetoric, the less happy the market becomes!
I think that for the past few days, the market has been reacting to the news from the Campaign Trail. Negative rhetoric from both sides, coupled with a growing certainty that Obama will be the next President and the incredible soap opera swirling around Republican VP nominee Sarah Palin have deflated the value of stocks and overshadowed some positive economic news.
As of today the London Bookmakers have placed the following odds on our elections:
Obama 4-9 to win. (A 9 Pound bet will win 4 Pounds if Obama wins.)
McCain 13-8 to win. (An 8 Pound bet will win 13 Pounds If McCain wins.)
Palin will be replaced before the election 8-1. (A one Pound bet will win 8 if Sarah Palin leaves the ticket.)
Although it is early and the odds could change, in the past the London Bookmakers have almost always correctly predicted the outcome of our Presidential elections. (I’ve always found it interesting that you can bet on political elections in England, but not in the US. And I think it is a tribute to the US that we don’t allow the process.)
Here is my take on what we will see over the next several months. I think the perception will grow that Obama will win. I think that the market will grow increasingly skittish regarding the perception of the Democratic ticket’s rhetoric regarding taxes and healthcare. You may remember that in 1992, the stock market deflated when then First Lady, Hillary Clinton, spoke out in favor of nationalized health care.
The economic news, which has been getting better recently, will continue to improve. Oil is declining. Commodity prices are plummeting. Both bubbles have burst. The dollar is getting stronger. The credit crunch will lessen. Housing will hit bottom sometime in 2009.
The one potentially troublesome issue on the economic front is, and will continue to be, the threat of inflation.
On the positive side for you, our stocks continue to be the right stocks on a relative basis and our large cash position continues to soften the blow of this decline.
We will continue to be defensive. We will continue to strive to protect your assets. We will also be hopefully and guardedly optimistic that the US stock market will emerge from this eight-year long bear market sometime in the not too distant future.
The Silver Lining = Long-term bear markets of the sort we have lived through are usually followed by periods of explosive growth. If history is any indication, investors who have faith and patience through the final days of this painful period will be amply and substantially rewarded in the coming rally.
The stock market rarely does well during a Presidential Election Campaign, particularly when the outcome of that election is in doubt. The more divisive the rhetoric, the less happy the market becomes!
I think that for the past few days, the market has been reacting to the news from the Campaign Trail. Negative rhetoric from both sides, coupled with a growing certainty that Obama will be the next President and the incredible soap opera swirling around Republican VP nominee Sarah Palin have deflated the value of stocks and overshadowed some positive economic news.
As of today the London Bookmakers have placed the following odds on our elections:
Obama 4-9 to win. (A 9 Pound bet will win 4 Pounds if Obama wins.)
McCain 13-8 to win. (An 8 Pound bet will win 13 Pounds If McCain wins.)
Palin will be replaced before the election 8-1. (A one Pound bet will win 8 if Sarah Palin leaves the ticket.)
Although it is early and the odds could change, in the past the London Bookmakers have almost always correctly predicted the outcome of our Presidential elections. (I’ve always found it interesting that you can bet on political elections in England, but not in the US. And I think it is a tribute to the US that we don’t allow the process.)
Here is my take on what we will see over the next several months. I think the perception will grow that Obama will win. I think that the market will grow increasingly skittish regarding the perception of the Democratic ticket’s rhetoric regarding taxes and healthcare. You may remember that in 1992, the stock market deflated when then First Lady, Hillary Clinton, spoke out in favor of nationalized health care.
The economic news, which has been getting better recently, will continue to improve. Oil is declining. Commodity prices are plummeting. Both bubbles have burst. The dollar is getting stronger. The credit crunch will lessen. Housing will hit bottom sometime in 2009.
The one potentially troublesome issue on the economic front is, and will continue to be, the threat of inflation.
On the positive side for you, our stocks continue to be the right stocks on a relative basis and our large cash position continues to soften the blow of this decline.
We will continue to be defensive. We will continue to strive to protect your assets. We will also be hopefully and guardedly optimistic that the US stock market will emerge from this eight-year long bear market sometime in the not too distant future.
The Silver Lining = Long-term bear markets of the sort we have lived through are usually followed by periods of explosive growth. If history is any indication, investors who have faith and patience through the final days of this painful period will be amply and substantially rewarded in the coming rally.
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