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Election Result Will Not End The Uncertainty

  • Written by Syndicated Publisher No Comments Comments
    November 7, 2012

    Wouldn’t it be great if the bitterness and uncertainty of this election season would end with today’s election.

    There’s a record amount of cash being held on the sidelines by corporations that might be moved into the economy if businesses could have a reasonably clear vision of what the future holds in the way of taxes and regulations that they will be operating under. It doesn’t matter all that much whether those conditions would be more favorable for them, or less favorable. The key is that they be able to make two to five-year plans without fear that the rules and conditions they set up for and acted on, will be changed part way through.

    Investors have also pulled record amounts of cash out of the stock market that could begin to come back in if not for the uncertainty about the companies they might invest in, plus uncertainty about their own situations going forward. Can they plan on the current tax situation regarding dividends, capital gains, and income, continuing or will big changes take place that will affect how they should invest?

    If only today’s election would end those uncertainties. If only we could almost immediately know, based on which party wins, that their agenda will set the conditions for the nation for the next four years.

    But there is not a remote chance of that happening.

    The election is apparently going to be so close that we will much more likely face continuing dysfunctional gridlock.

    And that might be the best outcome we can expect.

    There is also the very real possibility of another Bush-Gore type fiasco, in which several key state elections are so close that recounts are demanded, or issues are raised over the counting of absentee ballots and the like, delaying the official results for weeks.

    Colorado, Florida, and Pennsylvania conduct automatic recounts if the results are within 0.5%. The latest polls show the candidates could easily be within that degree of closeness. President Bush’s final margin of victory in 2000 was only 0.009%. In states that don’t have automatic recounts a candidate can request one.

    So the election is not going to end the politically-based uncertainties, gridlock and bitter contentiousness will continue. And uncertainties would even mount if the results should be delayed and unknown for weeks as happened in 2000.

    Meanwhile, markets still will face the uncertainties that are not so much politically-based, like rapidly deteriorating corporate earnings and slowing global economies.

    Those waiting out the election expecting it to go a long way toward ending uncertainties for the market are going to be disappointed.

    The Uncertainty Shows in the Charts.

    The market has gone nowhere since mid-September, the Dow down 4%, and broken down through short-term support at the 50-day m.a., but remaining resilient especially in the face of the disappointing 3rd quarter earnings.

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    The always more volatile Nasdaq is down less than 6%.

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    Pundits are expecting the election to be a game-changer for the market one way or the other.

    We shall see. 

    To read my weekend newspaper column click here:  Investors Are Not Dumb!

    Subscribers to Street Smart Report: There will be an in-depth U.S. Markets update tomorrow in your secure area of the Street Smart Report website.

    Images: Flickr (licence attribution)

    About The Author

    Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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