The election outcome Wall Street wants most

Politicians will have to turn their attention to resolving the budget impasse and find a way to avoid the fiscal cliff.

By The Fiscal Times Nov 6, 2012 12:20PM
By Suzanne McGeeThe Fiscal Times logo
 
Within hours, the apparently unending stream of 2012 presidential campaign rhetoric will finally be at an end – probably. But even before the inauguration festivities mark the swearing in of the victorious candidate, politicians of both political persuasions, outgoing and incoming, will have to turn their attention to resolving the budget impasse and find a way to avoid the toxic combination of automatic tax increases and mandatory, across-the-board spending cuts scheduled to kick in on January 1, 2013.

Both candidates have devoted tremendous time and energy over the course of the year to date to spelling out their respective visions for the United States. The problem? Whoever is elected is going to have a tough time moving forward on any front, much less delivering on pledges to transform the country on Day One of their presidency, if in the weeks that elapse between tomorrow’s poll and New Year’s Eve, they fail to avert catastrophe. If the United States manages to run its economy off the “fiscal cliff” like a particularly demented lemming, those grand visions of the future have even less chance than ever of materializing.

What does that mean for financial markets? For now, you can expect to read in pretty much every financial publication of your choice – this one included – an array of thoughtful and detailed opinions of which kinds of investments are likely to outperform or lag depending on the electoral outcome. A Democrat in the White House, but a Republican Congress? A Republican majority throughout Washington? A split in Congress, with the House dominated by one party and the Senate by the other? Simply analyzing the possible ramifications as of Wednesday morning is enough to keep policy and market junkies contented for weeks.

The problem with that is that it is all academic, at least in the short term. Because as soon as the election outcome is determined, you can be sure investors are going to be less concerned about its impact on the energy industry or the health-care sector than they are about the fiscal cliff.

And if you think that the stock market has felt volatile at times so far this year, you ain’t seen nothing yet.

The one safe bet is that volatility will increase in the short term as Congress reassembles to try to hammer out some kind of short-term agreement to prevent sequestration – those mandatory spending cuts – from taking place. And the odds are that, absent a degree of harmony on the part of those lawmakers that’s been rare in recent years, it is going to be tough for stocks and other “risk assets” to build on the gains they have recorded so far this year.

At the moment, the consensus is that a deal will be struck to avoid the fiscal cliff. While whoever wins the White House either won’t face re-election or won’t face it for another four years, members of the House will be back in front of voters again in only two years. And it’s unlikely that President Barack Obama wants to go down in history as the president who was unable to prevent economic catastrophe that could have been averted – or that his Republican challenger, former Massachusetts governor Mitt Romney, cares to begin his presidency with at least one arm tied behind his back.

Pragmatic self-interest is likely to drive politicians to carve out some kind of solution, even if it’s another short-term one.

That consensus is helping to provide a floor for the stock market at present. Without it, the slump in corporate profits and growing caution on the part of companies still announcing their third-quarter results would have put even more of a dent in stock market valuations. Now the question becomes the length and nature of the negotiations that must follow – and the kind of rhetoric that will emerge in the days following the election results.

The more rapidly those results are put to one side and legislators can get back to Washington and begin serious negotiations; the more smoothly those talks proceed; the less doomsday rhetoric emanating from either side; the greater the odds that the financial markets will remain somewhat calm. But as earnings season draws to a close, the markets’ focus will shift inexorably to Washington, in hopes that whoever inhabits the White House, it will be common sense that is the real victor.

Suzanne McGee is a columnist at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.

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83Comments
Nov 6, 2012 3:34PM
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This article never once attempted to answer the question posed by the title...WTF??  What a waste of a read.
Nov 6, 2012 3:38PM
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5 million jobs gone thanks to free trade and both candidates favor outsourcing our manufacturing so that the rich campaign contributors can get richer.heaven forbid they have to hire americans and pay a fair wage.did you see 60 minutes the other day.the rich guy moved his manufacturing to a central american country then imports his goods here.he pays so little down there he wouldnt say how much.if we had a tariff the americans he laid off would still be working.why cant we get just one session of congress to represent the american people.our government is soooo broken.the rich rule us.i had hoped the supreme court might help.making corporations the same as people just made things worst.
Nov 6, 2012 4:10PM
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Total waste of time ...the article had nothing new to say!
Nov 6, 2012 3:53PM
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dems and repubes work the hardest to make us think they don't get along, but in reality they all work together to keep peons in check!
Nov 6, 2012 3:26PM
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Naaaaaa....avoiding Fiscal Cliff....?

 

Obama just showed us how to dive the last four years and let's prepare ourselves for the worse if he gets back in the What House.

Nov 6, 2012 4:15PM
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This can all be summed up pretty quickly and easily. The current person posing as a leader has shown his hand. He knows nothing about economics, nothing about being a commander and chief, nothing about homeland security and pretty much nothing about being the leader of the most important country in the free world.

The only thing that has happened during his watch that has been positive was the elimination of Osama Bin Laden, which was being perpetrated well before he took office. It was just a matter of finding the guy. I believe the end result would have been the same no matter who was President. This Libya thing is really really bad and shows our soft underbelly to the rest of the would be terrorists. 

Other than that, a lot of overpaid union workers and bankers (who are still reaping the bail out rewards) had their jobs preserved while hundreds of thousands of others have seen the livelihood disappear before their very eyes.

The market will get no better and most likely worse until the capital cleans it's house of all the self serving occupants which in no way resemble the patriots who put this institution of ours on the map. It's not about us or the economy any more, but about the vote.

This new breed of politician has shown that the only reason to take a stand on something is for the vote not for what's right and most able to build a equitable future for us and our children and their children.

I can't help but see the obvious similarities between the modern United States and ancient Rome. The military spread to thin, the reliance on foreign assets to survive, and living far beyond their means. The empire finally just shrugged it's shoulders and walked off with their hands in the air, making it easy for revolution from a once inferior force. Sound familiar?

I don't  have any faith in the existing leadership and I don't care who wins, they just better stop things rolling in the wrong direction and get it rolling back in the right one or were doomed to the eventual failures of all the kingdoms that followed this path before and didn't learn from their mistakes.

You notice I name no names or parties... That's because we're all supposed to be in this together and we clearly are not. No party is stepping forward and doing the right thing and we shall all suffer for a long time as a result.
Nov 6, 2012 4:16PM
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Scythrop

The Dow Jones closing on Jan 21, 2009 was 8,228.10

Nov 6, 2012 4:47PM
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Obama being elected was a big mistake and if he is reelected it will be a national tragedy.
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Simplification:

Print money result: devaluation of ALL American currency

Use that printed money to buy treasury bonds result: increase the Dow index, NOT increase value

Hand money at "0"% interest to banks result: starving fixed income taxpayers AGAIN to provide for the losers of the nation who were placated during the entire time those TAXPAYERS were still employed

OBAMA, I would say that he ain't shlt  ............. however, he actually is something between a SHART and full PROJECTILE DIARRHEA

Nov 6, 2012 3:57PM
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Ahh Hymes where did you get that 67% number? Make it up? Where was the market when Obama took office. Almost 13,000? So the market is 13,275 right now...what was unemployment when he took office? What was the GDP when he took office? What is it today? I can't wait to see what numbers you throw at us....talk about feeble!!!

 

Nov 6, 2012 6:00PM
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No matter who is elected, the plutocrats are still in control. We elect puppets, but the puppeteers remain the same. From a handful of lobbyists in the 50's to over 35,000 registered today, these corporate henchman have influenced congress for the benefit of Wall Street and decimated Main Street, the backbone of the economy. The bottom 80% of us only control 11% of the nation's wealth, while the top 20% control 89% and of that, the top 0.01% control 37%. Capitalism has not failed us, through greed and corruption we have failed the system. Four decades of poor governance will not be changed by a president. 
Nov 6, 2012 4:54PM
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What a BS article. So, what does Wall Street want Suzanne ? Please answer your question!
Nov 6, 2012 5:05PM
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What a piece of garbage. Where in hell did you find the dummy that wrote it?
Nov 6, 2012 5:16PM
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Obama's record speaks for itself. He misspent trillions of taxpayer dollars and didn't get the economy going. He is now predicting trillion dollar deficits every year. That is not acceptable and hopefully he will go. We need to get our budget balanced and start planning to pay down the 16 trillion we already owe. I don't care if you are a Republican or Democrat we will not have money for any programs in ten years if we don't get our act together.
Nov 6, 2012 3:53PM
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'members of the House will be back in front of voters again in only two years'

 

they have to come with some resolution, otherwise they will lose their seat. GOP majority??????

Nov 6, 2012 4:55PM
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The big players on Wall Street invest their money wisely in both parties so they'll be fine either way.
Nov 6, 2012 5:33PM
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The whole story line about moving manufacturing overseas is BS, the average product contains only 3-7% labor. The Chinese government builds the buildings and owns the equipment, hell if Uncle Sam built me a building and equipted it I 'd kick their asses. China's goal which is just about complete ie rid us of all our manufacturing capabilites and then raise prices and it's almost there. Politicians regardless of party do't give a s$1t about average Joe. and most CEOs are so short term focused the don't care about anything except short term profits. We will be defeated without a shot fired.

Nov 6, 2012 5:19PM
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I just got shafted by the corporation I shed my blood sweat and tears for years.   Ok, that happens.   So... I am unemployed.   Can I write non-sensical articles and get paid.

Where do I send my resume or does it even matter if I have any education.

Nov 6, 2012 5:06PM
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Would you believe that because both candidate are paid for and owned by the 1%, Peter Griffith (AKA Family Guy) is actually getting some votes. Just goes to show how fed up people are with the system, the economy and the cronies in DC.
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