Home About Archives RSS Feed

@theMarket: The Polls Rile the Markets

By Bill SchmickiBerkshires 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.

     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Scoil Rince Bréifne Ó Ruairc Participated in North American Open Championships
Pittsfield Police Participating in US 20 Speed Enforcement Project
MassDOT Project Will Affect Traffic Near BMC
Dalton ADA Committee Explores Expanding
Milne Public Library Trustees Announce New Library Director
Clark Art Presents Free Thematic Tour on Music in Art
BCC, Mill Town Partner to Support Philanthropy Through 40 Under Forty
SVMC' Wellness Connection: March 15
Pittsfield Community Meeting On Rest of the River Project
Slavic Easter Egg Decorating At Ventfort Hall
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (183)
Archives:
March 2024 (5)
March 2023 (4)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Recession Crisis Markets Rally Japan Banking Energy Europe Selloff Economy Euro Currency Stocks Europe Stimulus Employment Oil Election Federal Reserve Commodities Retirement Stock Market Debt Taxes Fiscal Cliff Greece Bailout Metals Jobs Banks Deficit Congress Debt Ceiling Pullback Interest Rates
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising
@theMarket: Melt-up in Markets Fueled by Momentum