Tags: Lim | election | results | stocks

Money's Lim: Elections Results Won't Hamper Stocks

By    |   Wednesday, 05 November 2014 12:36 PM

While financial commentators are debating the impact of Republican election victories on the economy, the results won't keep stocks from rising, says Paul Lim of Money magazine.

He offers several reasons why:
  • "We are about to enter the third year of the Obama administration. And third years are hands-down the best years in the stock market," Lim writes. The S&P 500 index has risen nearly 17 percent on average in the third year of presidential terms since 1926, according to the Leuthold Group.
  • "Stocks surge sharply in the immediate aftermath of mid-term elections," Lim says. Stocks have returned 25 percent annualized in the six months after mid-term elections, according to Leuthold.
  • "Washington gridlock doesn’t stall markets," Lim writes. In years when we are led by a Democratic president and unified Republican Congress, the S&P 500 index has averaged an 8.6 percent annual increase since 1900, compared with 7 percent for all years, according to Sam Stovall, U.S. equity strategist for S&P Capital IQ, Lim reports.
"Will the Republican victory in the Senate lead to more legislation or gridlock?" Lim asks. "As far as Wall Street is concerned, that doesn't matter as the markets are about to enter their most fruitful months."

But MarketWatch columnist Michael Sincere isn't so worry-free.

"The market has reached all-time highs, and many investors are wildly bullish. Most money managers are hoping for a year-end buying frenzy that will take the indexes even higher," he writes.

"Greed has returned along with sky-high margin debt. Recently, one host on a financial program asked, 'Are bear markets a thing of the past?'"

And what does Sincere think of this? "I hate to be a party-pooper, but this is not a time to celebrate, but rather to be cautious," he says.

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While financial commentators are debating the impact of Republican election victories on the economy, the results won't keep stocks from rising, says Paul Lim of Money magazine.
Lim, election, results, stocks
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2014-36-05
Wednesday, 05 November 2014 12:36 PM
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