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Is the Election the Biggest Threat to Stock Market Stability Right Now?

An article over at CNBC.com is pointing out that as influential as an upcoming meeting of the Federal Reserve will be to the performance of the stock market over the shorter term, that the strength of the political winds blowing in the final days of the 2016 presidential campaign could well be what knocks the market from its moorings for some time to come.

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The stock market has been looking forward to both a Hillary Clinton win, and the Republican retention of the House of Representatives, for some time. The stock market, delicate beast that it is, does not like it when one party…regardless of which party it is…has control over both the executive and legislative branches of government. That’s because the stock market has great affection for gridlock, politically speaking. The market appreciates it when there are no sweeping changes, no mandates, because big changes tend to be more than the market can bear. When one party is in full control of the government, it means their grand political plans will go forward, and markets are just not comfortable with the degree of change that often ensues in such circumstances.

As noted, the market seemed rather comfortable with where things were headed until a few days ago, when Hillary seemed to be motoring to the Oval Office and Republicans were going to maintain control of the House. In the view of the markets, that would be a good thing, because the pushing and pulling on each side would leave the net result of any attempted changes at something more modest.

However, the revelations that we might not be finished just yet with Hillary and the email scandal are now throwing things out of whack. A win by the anti-trade Trump, and Republican maintenance of control over Congress, could see what some are calling a Brexit-like response in the markets.

On the other hand, if Hillary wins and the Democrats manage to take over Congress, then the tax-and-spend agenda of that party, as well as its desire to institute even more regulations on business, would also upset the markets greatly for an extended period.

For the markets, then, a Clinton White House and Republican Congress…or, at least, a Republican House of Representatives…is most desirable. Anything else could spell trouble for investors, according to observers.

 By Robert G. Yetman, Jr. Editor At Large

 

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