Politics and the markets
Gary Kaltbaum is an investment advisor with
over 18 years experience, and a Fox News Channel Business Contributor. Gary
is the author of
>The Investors Edge. Mr. Kaltbaum is also the host of the nationally
syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also
editor and publisher of “Gary Kaltbaum’s Trendwatch”…a weekly and monthly
technical analysis research report for the institutional investor. If you
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I am no Dick Morris or Robert Novak…so I won’t even try to
predict what happens in the elections. I have my own ideas but I will probably
be wrong. I want to talk about what I think happened, the outcome and how the
outcome could affect the market.
As of this writing, I cannot find one person saying the
Republicans hold Congress. The numbers range from a loss of 15-20 to a loss of
40. Do I hear the words “Speaker Pelosi?” The Senate looks much tougher as the
Dems would need a clean sweep…which is not out of the question by any means.
It was once said that all politics were local. I disagree. To
me, this election was and is all about Iraq. Iraq enabled great economic numbers
to not register. Iraq enabled Democrats to actually say they would raise
taxes…and be ignored. In the past, that kind of talk on taxes would kill any
chance immediately. Iraq enabled Democrats and the media to pound away on a
daily basis at what Americans hate…the deaths of our own brave soldiers. Look
no further than Iraq.
Secondly, what happened to Social Security reform, tax reform,
immigration reform? What happened? You got me on that one. I thought when a
party has all three houses, they should be emboldened. Instead, Republicans
acted timidly…and thus we are here. If Republicans lose…rightfully so…and
I am a fiscally conservative Republican… socially moderate Republicann …and
I am nauseated at what I have seen. Hopefully, lessons are learned from all
this.
Thirdly, the Republicans should have hired me to do their P.R.
What has been an extraordinary economy in spite of 9/11…in spite of
Katrina…in spite of $80 oil…in spite of 17 rate hikes…has not been sold
well. In fact, the greatness of this economy has been ignored. 4.4% unemployment
has been ignored…strong markets have been ignored…profit growth has been
ignored…wage growth has been ignored…productivity has been ignored…the
highest net worth ever has been ignored…the fabulous tax recepits have been
ignored…and I give most of the credit to the timely Bush tax cuts. You cannot
spin this economy any other way…but somehow, the polls never got traction on
the economy. I would have been yelling and screaming the numbers like Bill
Clinton used to do on a weekly basis.
If the Republicans pull a rabbit out of a hat, the chalk is on
a further market rally…but what about the DEMS? I am hearing loads of talk
about how “business-unfriendly” they are since they have been yelling at
companies like Wal Mart and Exxon for the past couple of years. Don’t kid
yourself! Do not confuse election rhetoric with reality. Whlle I do
believe there are many Dems who are anti-business and some downright socialist
with their thinking, keep in mind, every one of these politicians are tied to
business one way or another. I suspect if the Dems win, they will be smart
enough to lighten the rhetoric against business. At least…I hope.
What about tax policy? That is ultimately my big worry. Did
you see what happened to the Canadian trusts in the past week when the govenment
propsed taxing the dividends? CRUSHED! So…being 1 plus 1=2…I will be less
than thrilled…and suspect markets will be less than thrilled if dividend taxes
get hiked back up. I do not know if the reaction will be immediate as this will
be phased out down the road.
I am playing it one way…like I always play things. I will
let the market decide where it wants to go…regardless of who is in office. I
will be keeping all this info in my file manager. The market has its way of
doing whatever it wants to do regardless.
Right now, major averages are still in good shape trading
above support as well as moving averages. There has been suspect action recently
with RETAIL and other CONSUMER areas acting toppy…with the NASDAQ has also
come under some distribution…with some leaders breaking down..and with small
and mid-caps continuing to lag…but until major averages roll over, they get
the benefit of the doubt. I will have more after all the noise dies down later
this week.