Election Day Rally

When two events happen at the same time, there is a strong psychological basis for connecting them.

Today is such a day.  The widely-expected end of the election and Obama victory is somehow getting linked to the stock market.  We discuss this, and future investment opportunities, at our sister site, ElectionStocks.com.  Please check it out for a more detailed analysis.  This will be the source for future stock-specific recommendations as we analylze the emerging Obama plan.

The key issues are still ahead of us.  Our read is that Obama is constrained by the economic environment.  We are very interested in his first decisions.  These will include the following:

• How to handle the funds approved for the “rescue plan.” Our hope is that there will be continuing attention to establishing accurate pricing for distressed assets, not just investments in private companies.
• The approach to fiscal stimulus. There is widespread agreement on the need.  The implementation is open to debate.  Will something emerge from a lame-duck Congress, or will Democrats wait for the new term to get a package they like.  The trade off is delay versus a plan they really want.
• The attitude toward taxation. An Obama administration is expected to increase taxes in a way that will affect capital gains and, perhaps, dividends.  We will be watching closely to see how Obama, as a President-Elect, views these issues.  Our forecast (based on better insight than most) is that many proposed tax increases will be deferred, perhaps for two years until the expiration of the Bush tax cuts.

Investment Notes

Somewhat to our suprise, the TCA-ETF model has already indicated some sector buy signals and more are imminent.  The climate is more positive, perhaps validating the signal from our Gong model.

While the Democrats sing Happy Days are Here Again, we have no such illusions.  There are continuing issues.  We will closely monitor the plans for dealing with the acknowledged housing and credit problems.

Posted in Categories: Contributor, Economy, External Research, Politics.

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