By David Gaffen
This week is chock full of events to keep investors interested, be it in election day this Tuesday or jobs data on Friday. It’s hard to escape the notion that the United States may be starting to hit a stride when it comes to growth. There’s some expectation that this may positively affect U.S. earnings, which generally came out looking good with companies like Caterpillar and Union Pacific saying relatively good things about the U.S. in their earnings. There is also the worry that the U.S. may be dragged down by the rest of the world, but so far that effect has been limited.
The election has the possibility of derailing the market rally, but really, only for a time. Elections – more true of presidential elections than mid-terms – bring a litany of armchair analysis that ranges from uninformed to painfully uninformed, and most is reduced to mostly aphorisms. There’s little in the way of overarching themes being identified this time around.
Certainly Congress will be looking at specific energy issues. Other than that, the Republican goal of non-negotiation with Obama, regardless of the issue, will probably prevail here, leaving the story mostly as the gnashing of teeth and not much else. What will be interesting to see is whether the clarity over the results of the mid-terms will end up taking the year-end rally and putting it into another gear, as the S&P does seem set for a typical seasonally-strong run.
What could drive that into a ditch? No result on Tuesday evening. Close races in a few states (Georgia in particular) for the Senate could mean recounts and the potential for a long, dragged-out period where it is unclear who holds the Senate. The investment community tends to lean to the hope that Republicans end up doing better in the results and take control of the Senate, thereby giving it control of both Houses, which would be the most likely option right now.
