New Fox News piece: If Republicans Win Big on Tuesday, Stocks Will Go Up
The economic outlook is bleak. Businesses aren't hiring and the economy has lost 400,000 jobs since May. Unemployment has remained at least at 9.5 percent for 14 months, A record length of high unemployment not encountered since the Great Depression. GDP is growing but the growth is slowing. Consumer confidence is falling; the dollar is falling; the real estate market remains in a slump. And the Obama administration has overseen the 2009 and 2010 deficits at unprecedented levels, accumulating over $2.7 trillion during just two years.
Still, investors sense a glimmer of hope, reflected in rising stock prices. Stock prices have much more to do with long-term expectations of profitability than short-run results. This new optimism likely reflects the rapidly changing political outlook. Stockholders have already been anticipating higher taxes and health care regulations under an Obama administration with basically free rein to adopt whatever economic policy that they want. Now, with Republican victories likely on Tuesday, particularly in the House, predictions are for a more favorable business environment and better economy.
While it is all very intuitively plausible, hard numbers also back up this discussion. . . .
The day of the election: "Expectation of Republican win lifts Wall Street."
The day after the election: "Dow Climbs to Highest Since Lehman, 30-Year Bond Slides on Fed."
This chart from Intrade at 3:50 on Tuesday, pretty much shows that the 60+ win in the house was already anticipated by the afternoon on election day.
The Republicans actually did slightly worse in the Senate that expectations. This chart for the Senate is from Intrade at 3:50 on Tuesday.