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Eric Singer to Moneynews: Buy Stocks When Congress Is in Recess

By Forrest Jones and Steve Cordasco   |   Tuesday, 23 Oct 2012 07:27 AM

Want to make money in the stock market? Buy when Congress is about to go on recess, according to Eric T. Singer, author and manager of the Congressional Effect Fund.

Forget the presidential elections when it comes to swaying stock markets, as Congress makes for a much more accurate weather vane.

Look at history.

“I go back to 1965 day by day, which is 12,000 trading days, that’s 12,000 observations, and on the 7,900 days [Congress is] in session, the market went up less than 1 percent annually in price,” Singer told Newsmax TV in an exclusive interview.

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“On the 4,100 days that they were out of session or on vacation, the market went up over 16 percent annually in price, and the data is consistent going back all the way to 1897 day by day. That’s 30,000 observations. People talk about the Super Bowl indicator or election indicators, they are looking at 40 observations.”

By their nature, lawmakers bring uncertainty to markets by changing legislation important to investors.

“You have to remember there are 535 members of Congress, and each one each day is thinking how can I make a name for myself?” said Singer, author of “Trade the Congressional Effect: How To Profit from Congress’s Impact on the Stock Market.”

Editor’s note: To order ' Trade the Congressional Effect' at a great price — Click Here Now.

“Each one thinks of himself as an issues entrepreneur and thinks ‘I can gain attention and donations and votes and power by thinking of reforming the healthcare industry, the banking industry, the coal industry, the student loan industry.’ So every day they are at work they are thinking about how they can change the rules of the game.

Presidential elections tend to grab headlines when it comes to stock markets, though investors would be wise to place less weight in who takes the White House, Singer noted.

It might not be clear if markets are awarding a winner or just buying on relief with a president leaving office, which could determine the length and nature of a rally.

Furthermore, market-friendly presidents often need time to push through reforms, which could delay a market response by quite some time.

For instance, take President Ronald Reagan.

“In 1980, Ronald Reagan won and the stock market went up 32 percent. Did it go up 32 percent because Jimmy Carter was president or because Ronald Reagan was about to [take over]? So I think that when you parse through all of that, it’s actually not quite as clear,” Singer said.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

“The market ran up, it digested the news and then there was a year and a half or a two-year period where the market went down or nowhere while the tax reform that he put together came together.”

When it comes to playing the upcoming presidential elections, meanwhile, investors should brace for falling stock prices.

“Either [GOP nominee Mitt] Romney or [President Barack] Obama is going to win, and I think in either case, the market is going to come under pressure,” Singer added.

“I think that if President Obama wins re-election I think that the market will be under substantial pressure, and I think that if Gov. Romney becomes President-elect Romney, I think that he’s promised enough change in the form of a grand bargain that will take some time to pull together.”

So which party is better for stocks when it comes to controlling Congress?

“The thing that is clear is that a Republican Congress is much better for investors on their real wealth,” Singer said.

Editor’s note: To order ' Trade the Congressional Effect' at a great price — Click Here Now.

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