Handicapping the Presidential Election

With increasing frequency, investors are trying to handicap the upcoming Presidential Election. For example, many investors are in the camp that if Mitt Romney is elected, the market will react favorably. Alternatively, many fear that if President Obama is re-elected, the market may be negatively impacted. As I reflect on the upcoming election, I have come to believe that it doesn’t really matter. While the White House sets the tone and direction, we need a functioning Congress to make it happen.
Thus, what does matter is whether we, as a nation, can somehow find the means to bury the divisive and acrimonious behavior between the Democratic and Republican Parties and agree to reach somewhere in the middle to make the hard decisions that have to be made.

Is it not evident to everyone that we are facing a serious financial crisis? Regardless of which party one aligns himself/herself to, is it not obvious that we need to raise revenues (taxes) and reduce spending? If the answer to these questions is yes, then everyone has skin in the game…everyone will be impacted by changes that must be made, either directly or indirectly.

If we can agree to disagree, yet embrace legislation that allows us to live within our means and have a little left over each year to reduce our deficit, my viewpoint on the economy and market is quite positive.

If, however, our elected officials continue to behave in the manner in which we are now experiencing, the continuing deadlock will prove to be devastating to our economy regardless of who is in the Oval Office.

Sadly, yet fortunately, I think members of the House and Senate are so wrapped up in their own self-survival, that once the election is over, they will come to a bitter but workable compromise that we so desperately need, if only to improve their own chances for re-election.

Your thoughts and questions are welcome.

Christopher J. Kress, CFA