Why Washington will kill the market (or not)
The wise and wonderful Ed Yardeni gives bullish and bearish Money & Politics scenarios:
Here’s the bullish scenario for stocks: The economy could continue to grow, especially now that the uncertainty is over about how the healthcare system will be overhauled. The resilience of the economy would be attributable to the Profits Cycle. If profits continue to grow solidly this year, as I expect, companies are likely to increase their payrolls and capital spending. Stock prices would continue to rally. A regime change in November would fuel a powerful yearend rally. This is the scenario that I believe is still the most likely to unfold.
Here’s the bearish scenario: The widely expected upturn in employment won’t happen. Instead, job losses could mount again if the Obama administration now pushes ahead with more of its divisive agenda. Much of it is just as controversial as healthcare has been. The President has suggested that he won’t mind if his party loses in November and if he is a one-term president as long as his agenda prevails. On January 25, in an interview with Diane Sawyer on ABC’s “World News,” Obama said, “I’d rather be a really good one-term president than a mediocre two-term president.” He added, “You know, there is a tendency in Washington to believe our job description, of elected officials, is to get re-elected. That’s not our job description. Our job description is to solve problems and to help people.” Spoken like a true community organizer.
Me: In political terms, this is the difference between Democrats a) losing 15-25 House seats and 3 or 4 Senate seats and b) 35+ House seats and 5-Senate seats.