How much of today’s volatility is the result of the election? Many times I have opined the averages decline 5% to 20% in a midterm because of uncertainty. If one is to believe the polls, there will be a change of power in the Senate.
Many times leading into the 2012 election, I opined the election could be one of tectonic proportions, further stating Governor Romney would be the next President; a repudiation of the President’s progressive policies. If traditional voting demographics held true, there would be forty five presidents not forty four.
It is often stated a stop clock is right two times a day.
Similar to current polls, I too think there will be a change of power in the Senate. However I think the odds are around 60% November can be an election of historical proportions and the outcome of 2012 was indeed tectonic as that outcome cemented the environment of today….one of total repudiation of an extremely progressive agenda, an agenda that may not be resurrected for many years.
Based upon a recent ABC News Poll, the President’s approval rating is 39% the same as the President’s credibility ratings, a record low credibility rating for any president at a midterm. All must be remembered the President was largely reelected on his likeability and credibility and his ability to mobilize the Hispanics, unmarried women and the youth.
This coalition has been shattered. There are ample stories where many candidates do not wish to campaign with the President.
The proverbial swing voters or independents approval rating is at a career low of 33% versus 52% in 2012.
Only twenty percent of Americans “strongly” approve of his job performance while 39% “strongly disapprove”
During the 2006 midterms, an election that witnessed a total change of power in Washington, the incumbent had a 40% approval ratings and a 54% credibility rating.
I will argue Americans are smart, recognizing ISIL or the Ukraine is the greatest national security threat not global warming. Benghazi, IRS, VA, etc. all have elements of a scandal where the White House is involved. Obamacare.
And now Ebola where the Administration is determined to have no change in travel policy where the President banned travel to Tel Aviv because one rocket landed at the out skirts of its airport.
A recent Gallup Poll confirmed all of the above further stating the Administration’s progressive agenda of minimum wage, women rights and global warming are the lowest concerns amongst voters.
Perhaps most damning is the prevailing view in the absence of good, evil will prevail. Unifying leadership is demanded.
What does this political rant have to do with the markets? Everything.
At yesterday’s market opening, all thought the averages would be crushed. Can it be argued a combination of oversold conditions that created attractive valuations, strong profits, a benign interest rate environment, rising pessimism amplified by rising optimism of a power change in Washington boosted stocks?
In the introductory paragraph I wrote the markets historically decline 5% to 20% during a midterm election session because of uncertainty. Historically prices rebound once there is some electoral clarity, a rebound led by the sectors that have been crushed.
The Russell 2000 has outperformed the last five days, rising 1.67% for the period versus a 3.39% five day decline for the S & P. As widely discussed the Russell 2000 was crushed from July-early October. It was about 5-7 days ago a consensus was forming there could be change yet again in Washington.
Perhaps the saying “it is never different, there are just different people” is appropriate.
Last night the foreign markets were up. London was up 0.79%, Paris up 1.78% and Frankfurt up 1.57%. Japan was down 1.40% and Hang Sang up 0.53%.
The Dow should open considerably higher on continued stimulus optimism, strong earnings, dour mood and oversold conditions. FRB Chair Yellen speaks this morning about income inequality. Will she mention recent vaoltility? The 10-year is off 3/32 to yield 2.17%.