Home About Archives RSS Feed

@theMarket: The Polls Rile the Markets

By Bill Schmick
iBerkshires Columnist
Recent evidence seems to indicate that stock market investors are not as enamored with Mitt Romney and the GOP as one would believe. The averages have now fallen below last month's "QE Infinity" announcement and risk falling further. This is why.

Up until the first presidential debate, President Obama was widening the gap between Romney and himself in the polls, especially in the swing states needed to win the election. Since then, Mitt Romney (the perceived debate winner) has narrowed that margin until once again both men are in a dead heat.

"But that should be good for the markets," protested a client from Bennington, Vt., this week.

Obviously, he did not read my column last month where I pointed out that markets and the economy do better under Democrats than Republicans according to historical data. But in this election there is even more at stake.

I believe that investors are afraid that one of the first things Romney would do if elected is fire Ben Bernanke, chairman of the Federal Reserve Bank. In addition, pressured by a Republican House and possibly Senate, he would overturn the recent quantitative easing program that the Fed announced in September. Those actions, so the story goes, coupled with the austerity policies of the GOP, would spell real trouble for the stock market and the economy in the short term.

I have tried to point out that reality and rhetoric do not mix well in a presidential campaign. What a candidate promises or intends to do on day one or two if elected, somehow always ends up being postponed or forgotten especially when the new president is faced with hard reality. Nonetheless, investors would rather sell on the rumor or, in this case, the fears of a Romney win.

So how reasonable is that strategy?  Not very, in my opinion since it would be extremely chancy for Mitt Romney to turn around and revoke the QE Infinity program. As a newly elected president, he could replace Bernanke, but he doesn't have the power to revoke QE since the Fed's decisions are supposed to be independent of the political process.

Of course, Romney could instruct a new Fed chief to squash the program, but why do that? What's done is done. Romney, like Obama, knows the economy is in poor shape. If the present QE program works, Romney can claim credit for it. If it doesn't, he can always blame it on his predecessor. There is simply no political or economic advantage to revoking this stimulus program.

In the meantime, the S&P 500 Index is hovering around a key support level. Given the actions of the markets over the past few months, I would guess that the index would break that support, cause a flurry of panic selling and then reverse to the upside, most likely on the back of new polls, indicating a new advantage for the incumbent.

I find it amusing that Wall Street, which has been on an anti-Obama tear for the last three years, has suddenly realized that he may be their best chance of keeping us out of another recession and possibly avoiding a big sell-off in the markets. Go figure. 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

0 Comments
     
News Headlines
Lanesborough Boy, 9, Heading to Motocross Nationals
Carrier, Wellington Record Double-Doubles in Giorgi League Win
Five-Run 10th Dooms SteepleCats in Loss to Mystic
Construction on Lanesborough's Narragansett Bridge Expected to Start
Playground Equipment Removed at Request of Williamstown Historical Museum
State Grants $600K to Improve Conte School Accountability Data
‘Party in the Park’ Returns to North Adams
Cheshire Selectmen Set Special Town Meeting Warrant
Berkshire Art Museum Kicks Off Season With 'Volume'
'Live on the Lake' Lineup Starts 16th Season on July 5

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (234)
Independent Investor (318)
Archives:
June 2017 (7)
May 2017 (7)
April 2017 (7)
March 2017 (8)
February 2017 (8)
January 2017 (6)
December 2016 (2)
October 2016 (1)
September 2016 (9)
August 2016 (5)
July 2016 (7)
Tags:
Europe Rally Oil Selloff Election Wall Street Taxes Debt Ceiling Commodities Interest Rates Housing Stocks Markets Federal Reserve Stimulus Economy Energy Stock Market Currency Recession Europe Deficit Debt Retirement Congress Banks Fiscal Cliff Crisis Metals Pullback Bailout Japan Euro Jobs Greece
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
The Independent Investor: A Tale of Two Charities
@theMarket: Markets in Pullback Mode
The Independent Investor: A Tale of Two Charities
@theMarket: FOMO Fuels the Markets
The Independent Investor: The Client Comes First
@theMarket: Markets Still on a Roll
The Independent Investor: Elder Care in an Age of Confusion
@theMarket: Markets Climb Higher
The Independent Investor: Ready For a 20 Percent Correction?
@theMarket: The Trump Dump