Why Gridlock is Good for Wall Street

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Posted: Nov 08, 2018 11:18 AM

After a nightmarish October, Wall Street is back on track to finish the year at all-time highs.

The mother of all Bull Markets is intact, as I suggested in last week’s column. On Tuesday, Nov. 6, the voters chose gridlock and investors have approved.

If you are going to have a divided Congress for the next two years, it’s best to have the Democrats controlling the House and the Republicans controlling the Senate. The Senate is much more powerful than the House. The House can propose budgets and policy changes, but they must be approved by the Senate and avoid a veto by the President.

On the other hand,  the Senate has much more responsibility, especially with the approval of treaties and ratifying the appointment of federal judges and Supreme Court justices. Republicans are likely to increase their majority to 53 senators.

For the next two years, the United States is facing certainty. And that’s good news on Wall Street.

According to Investor’s Business Daily, a divided government is ideal for the stock market. Reviewing the history of Wall Street since World War II, the best outcome came when Congress was divided. As Investor’s Business Daily states, “Looking at S&P 500 returns during each two-year election cycle, from Election Day to Election Day, the best outcome, an average 18.7% two-year return, came when Congress was divided. Unified control of Congress by the same party as the president yielded an average 17.3% two-year gain. When control of Congress was unified under the opposition party, gains averaged 15.7%.”

Last week, I spoke at the New Orleans Investment Conference, a hotbed of bears and gold bugs. It’s time that they throw in the towel and admit that things are looking up. The economy is booming, inflation is tame, unemployment is low, and interest rates are gradually moving up. The tax cuts won’t be reversed. President Trump can still continue deregulating the economy through executive orders. Now if Congress can just control its spending…

 

Good investing, AEIOU,

Mark Skousen

You Nailed It!

Sacrificing Our Blood and Treasure in a Hopeless War

Last year, Mayor Brent Taylor, of North Ogden, Utah, took leave from his job and honored a call to duty when he left his wife and seven young children for his 4th deployment to a place of armed conflict overseas. A major in the Utah National Guard, he would be serving to train an Afghan Army commando battalion. His wife supported his decision. His parents come from a long line of super patriots who believe in defending their country.

He was returned yesterday on Election Day in a body bag, having been killed by an Afghan soldier who was being trained by Major Taylor, 39.

When are we going to learn that it’s a terrible waste of our best blood and treasure to fight in the Middle East and neighboring countries such as Afghanistan? My view holds especially true at a time when we are running trillion-dollar deficits.

The Trump administration and the U.S. military must recognize the hopelessness of this never-ending war. It is time to get out and stay out.

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