This occured to me today...might just be another random thought. During the massive bull of the '90's there was a democratic president and a republican congress which resulted in a lot of gridlock and washington doing relatively nothing...which is GOOD. In this case the roles are reversed but definitely a situation for a lot of partisan bickering and no action. Except for the gridlock scenario...I would otherwise think democratic control of congress would be bad for the market (and the people)
Is the market rally predicting a democratic win? nope, a Republican win......... If the democrats take it the markets are headed down.
The likelihood of the GOP maintaining control of the House has gone from a 57% bet on Tradesports to 32 cents in the past two weeks. Foley seems to be the last straw. Index futures have rallied during this period while Treasuries have taken a hit. The market expects Bush to be using that formally non-exercised veto power a great deal the next two years. As soon as the market realizes the reality, that Bush is willing to kowtow to Dems on certain taxation issues, then we'll hiccup.