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Markets Take A Quick Nap Before 2008 General Election

Posted on | November 4, 2008 Time: 6:24 am |

Markets traded pretty thin today with a dash of boring, as all eyes and thoughts turn to Tuesday’s election, probably the single most influential American event since 9/11. The current talking-head consensus is that markets have priced in the Obama victory, but that if McCain were to win, markets would have a quick “rip your face off rally”. The reasons for the latter are as deep-rooted as dividends and greed on Wall Street; lower taxes for corporations, lower capital gains, more capitalist-leaning legislation…of course it also used to mean less regulation, but that’s just not the world we live in anymore.

I’m Like Switzerland Over Here!

I’ll refrain from revealing my political leanings outright, then immediately bet you 5 bucks that I reveal my hand anyway by the end of this post. Regardless, I’ll say that either candidate will be an improvement from the current, and not just because GWB has approval ratings lower than dirt. It is rather because his administration has lost the power to exert the influence over the financial markets befitting a United States President. It’s been made evident despite countless attempts to hold press conferences and push policy over the past month, each only reinforcing the day’s losses and negative sentiment.

In many respects, the U.S. is a leaking ship. Only instead of water rushing in, it’s our good qualities that have been rushing out. Our wonderful economy - the last bastion of true capitalism in the world - has succumbed to its own pressures. Our international image has been tarnished by a lingering military presence that has no international backing outside of a few familial nations. Our fiscal policies have left us at the behest of foreign investors who purchase our debt, debt that needs to keep being written at a furious rate.

Whomever wins this election, may he have the foresight to encourage investment during this deflationary period, not just through tax stimulus (which rarely goes towards investment anyway), but through pretax incentives and low capital gains…at least for a while (2010 anyone?). This market needs to breathe easy for a while, and the consistent inflow of retail capital will be just as necessary as getting the banks lending again.

Shaking the Magic 8-Ball….Will I Be a Good President?

Go out a little farther, and our new President will need to foster competition & innovation within certain industries that America can assume a leadership position in for the future - industries like alternative energy, biotechnology, clean technology, and green construction. There are tens of millions of jobs that need to be “repatriated” to ourselves in replacement of final losses in the auto and manufacturing sectors. We need to get back to doing what we do best, and that’s not creating pseudo-financial instruments or employing eye-popping leverage. It’s innovating, coming up with the best ideas in the world, perfecting their use, and then exporting them to the world.

Which ever of the two candidates can best take us to that future gets my vote on Tuesday. That candidate, regardless of his party, is the best long-term choice for the stock market, the one most likely to make America a wealthier nation in all the metrics that matter.

Ryan Barnes

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