As we head into the final days before our national elections, the stock market is predicting absolutely nothing. In the past, the stock market has often firmed up as we got close to the election because the market anticipates the outcome of the election and begins to put that issue behind us before the votes are counted.
Not this time.
While the general news is convinced that the Democrats are going to take the presidency and perhaps the Senate, the stock market is indicating that the outcome is far from decided. We cannot dismiss the idea that something unexpected might occur between now and Tuesday, Nov. 8, which could impact the outcome of the election.
However the election turns out, this article will become trash the day after the election. We will by then have decided who will occupy the White House (hopefully barring any challenges to the result) and we will know the political persuasion of the House and Senate. The investment markets hate uncertainty and the election is the biggest uncertainty directly ahead.
Beyond that, the larger question is the economic policies of the winning administration. Clearly we have had what I would describe as an uninspiring recovery from the last recession. The hardships of working class Americans have been widely documented even as the investment markets and the real estate markets have performed very well. The economic policy of the past eight years has been monetary trickle down: it has benefitted investors, but not our working classes. Worker incomes have stagnated and the economy has grown slowly, although much better than most of the rest of the world. Still, the rate of economic recovery is nothing to celebrate.
So I will be looking to see what the fiscal policies of the new administration will be and how well the administration will work with Congress to actually put their policies into effect. We have had six years of a do-nothing government as Republicans took control of Congress while the electorate re-elected a Democrat president. So by default we had monetary policies attempting to deal with the recovery without support from effective fiscal policies.
True of any election is that, regardless of the focus of the candidates, the winner will likely have to deal with issues that are not central to those addressed during the campaign. Those potential unknowns also have the ability to upset the apple cart going forward.
As you know, not everything impacting the market happens in Washington. Aspects of the economy are changing rapidly across the nation. I am talking about, among other items, the practices of consumers buying more products online and needing those goods to be delivered to them, the coming inflection point in medical costs and the same for higher education costs.
Alternative possibilities are beginning to present themselves to our out-of-control, high-cost medical care and education. Somewhere, amid these changes, a set of new investment possibilities is emerging.
