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 7, 2012 8:59AM
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This election have prove that Republicans need to wake up soon before they become irrelevant. 

 

Either move the country forward or risk losing the house and then it's bye bye.

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Of course Wall Street backs the Republicans. They want to be able to do whatever they want without regulations.
Nov 6, 2012 7:47PM
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i think wineanddineme nickname says it all, an ignorant twat
Nov 6, 2012 7:27PM
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Typical media BS. Attention gettig headline with no news. Is their anyone who thinks the media has any credibility?
Nov 6, 2012 7:04PM
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Party "R" will tell you that if you vote for party "D" they will ruin the country. Party "D" will tell you that if you vote for party "R" they will ruin the country. Both will tell you that the other is the devil incarnate. After the election they will set down together and figure out how to screw the country. This country has been getting screwed so hard for so long that now we are headed toward third world status. The average Australian and the average Canadian now are wealthier that the average American. One by one more nations will eclipse us as their prosperity grows and our wanes due to the burden of our bloated government. 
Nov 6, 2012 6:59PM
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My analogy of this admin is.... it's like Obama took over as head coach of a football team that was 2-14 and had lost their last 10 games, and implemented a new system. He stopped the bleeding, got rid of the non-performers, and the 1st year ended up 4-12. The next year improved to 6-10, 3rd 8-8, and now is sitting at 10-6 after year 4. Look at the slow and steady IMPROVEMENT of the economy. The republicans want to put the old coach back in charge, and think the results will be different than the last time. Everyone that thinks for themselves (i.e. doesn't take Fox "news" as their bible) can see improvement from where we were 4 years ago. Stop thinking of your personal goals, and think of the country. We ARE headed in the right direction!! GO MIDDLE CLASS !! BOO 1% ers!!
Nov 6, 2012 6:25PM
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The only time the Dem and Rep are in agreement is when they are voting to give themselves a raise
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 5:40PM
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Historically the S&P 500 has generated a positive return for the following 6 months - 1 year after the election. With the fiscal cliff looming it will be very interesting to see how the market performs going forward.

 

Nov 6, 2012 5:35PM
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Get ready for tomorrow's Market Crash !   Smart Money has left the House ! TAKE YOUR MONEY AND RUN !

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 5:16PM
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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 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.
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 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 4:54PM
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What a BS article. So, what does Wall Street want Suzanne ? Please answer your question!
Nov 6, 2012 4:53PM
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When Mitt promies a 20% across the board tax cut you should be hearing the following: " I am going to crew the middle class to the nines becaue they are so stupid...when someone makes 100 times the average wage and they each get a 20% cut...do the math...it just means the middlke class will have to cough up more csh than ever to contiue tithing to the wealthy...
Nov 6, 2012 4:48PM
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Before Obama took office, the markets were Dec 31, 2008 close was 8776.39 and Jan 2, 2009 closed at 9034.69. The market is now above 13,235 in four years, you can do the maths. Some of you who said, Obama mess up the economic should check his record or his progress. Before he took office, your house / home value is down, your 401k is down, America were losing more than 800,000 jobs per month, his record speak out loud, we are adding jobs, high paying jobs here in America. It took 8 years to mess the country up and it will take 8 years to get it right to pre president Bush.
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