Stocks have been getting quite the lift from both the election cycle and the Fed’s loose money policies, while mixed economic data have been just encouraging enough to keep the bulls contented. This allowed stocks to craft a technical break-out, and sans some game-changing bit of news, it may hold through at least election day.
Hold is about what they’re doing today; futures up a hair on a relatively quiet morning. Wal-Mart offering $4.6B for South Africa’s Massmart and Unilever in a deal for Alberto-Culver. Dallas, Richmond Kansas City Feds post regional surveys this week. Chicago PMI on Thursday. Final reading on 2Q GDP comes Thursday, ISM manufacturing survey comes Friday.
S&P 500 futures up 1.30, DJ futures up 16. Ten-year yield at 2.55%, euro’s flat at $1.3492, although it was weaker earlier.
I opined on Friday’s News Hub that the election cycle, and the Fed, were driving things here, and there’s an article in today’s Journal that bears out at least the former. We’ve been hearing for some time that traders are looking to the election, and the widespread notion that the GOP will take back at least one or even both houses of Congress. E.S. Browning says, in fact, the market is already pricing it in:
Investors are debating whether the November election will have an impact on the stock market. Actually, it probably already has.
In election years, the stock market typically hits a roadblock in the first half of the year, as investors worry about the looming vote. But money managers typically are looking three to six months ahead when making investment decisions, and by summer they are forced to start looking past the November vote. Much of the election rally can take place before the outcome is known, as investors worry less about the looming election and focus on the coming year.
The thinking on the Street seems to be that the GOP is more business-friendly, for one thing, and will act as a counterweight to the “anti-business” Obama administration (although it’s beyond me how any party that would front that monument to appeasement called the Dodd-Frank Bill could be described as “anti-business.”) Maybe. But this isn’t necessarily a moment in history that will benefit from gridlock. If the GOP, which apparently stands for “Glenn Or Palin” these days, just grinds Washington down to a halt, we will be even worse off for it.
Miller Tabak’s Dan Greenhaus makes the point:
We cannot envision gridlock being good for markets or the economy at this point in time. Will there be a halt to some policies the market perceives as harmful? Of course. But with the economic realignment ongoing, the country would be served by a rectilinear and somewhat unified Congress. We hope that the decision making process becomes more unified from here, but the probability of such unification remains less than absolute.
I’m not saying the Dems have all the answers; Lord knows they don’t. But this idea that a Republican victory in November is going to be a panacea is just so much GOP pablum.