November elections could trigger bull

Discussion in 'Trading' started by AAAintheBeltway, Sep 9, 2002.

  1. The great bull market of the '90's basically started when the Republicans took control of congress in the '94 mid-term elections. Before that, the markets had been rocked by a tax hike and the threat of socialized medicine via Hillary Clinton. We may be approaching a similar watershed election.

    I am neither bullish nor bearish at the moment, although there are good arguments for either posture. In looking out a bit however, the one catalyst I can see for a return of the bull is the upcoming congressional elections. The Democrats currently hold a tenuous one vote majority in the Senate, courtesy of turncoat former Republican Jim Jeffords. One third of the Senate seats are up for election. Surveying the landscape, I see at least four probable pickup's for the Republicans: New Jersey, where Dem. Torricelli is in trouble over corruption issues; Missouri, where freshman Dem. Jean Carnahan was elected on a wave of sympathy over her husband's accidental death two weeks before the election but has shown herself to be unqualified; Minnesota, where far left Dem. Wellstone faces popular St. Paul Mayor Norm Coleman; and South Dakota, which Bush carried with 60% of the vote. Possible Dem. pickups in Texas and North Carolina now look likely to stay Rep. Georgia is also very possible for the Rep.'s.

    True to form, the national media has softpedaled the possibility of a Republican return to majority status, and is concentrating instead on raising doubts about Bush's Iraq policy. Ironically, a Republican victory would thus be an even bigger surprise and likely have more impact on the market.

    A Republican congress would likely focus on tax issues, such as cutting the cap gains rate, doing something about the double taxation of dividends and expanding IRA's and 401k palns and perhaps partial privitization of Social Security. Any of these would be rocket fuel for a stock market deep in its third year of decline.
  2. Relieving double taxation of dividends and/or lowering capital gains taxes (both of which I philosophically favor) would create burdens elsewhere in the federal tax and finance system, in the form of either other compensatory taxes or greater public debt,or a combination of both. The tax rolls are way down. With increased defense expenditures and an expansion of the Federal government in the wake of 9/11, along with the ongoing Pork juggernaut in Washington, don't expect downsizing in the federal budget. Public debt is mounting, making tax relief a contestable issue.

    And people today are not so interested in stocks, and the prospect of keeping more of your winnings will hardly entice them to the table, especially in the distrustful and bearish climate of today.

    Are enough Americans today enjoying enough surplus income that they are able to put more in their 401ks? And if so, is it enough to fuel the equities market?

    Once there is some real big $$$ to be invested, only one thing will get investors back to the market in droves: GREED, and a lack of alternative investments. It just has to be properly channeled. So you better pray the economy turns for the better, and that Wall Street can get Madison Avenue to finagle the scumbucket image of Wall Street and corporate america out of the average investors' minds.

    Until then, its trading with both eyes open.