Thursday, November 10, 2005

Watch the Market

If you want to track the importance of Tuesdays election results as a harbinger of the 2006 elections, watch the markets. The MSM, as predicted, will claim that because the Dems held onto 2 governorships, and lost one lt. gov. post (in VA) that they previously held, they are well positioned for 2006.

But if the markets agree, and if participants foresee either the Dems taking the Senate or picking up more than a handful of seats in the House, the markets will start a steady slide downward. The bull market in U.S. equities coincided with the Republican House sweep in 1994 as businessmen and investors bet on lower taxes, less regulation and a reduction in frivolous lawsuits (all promises delivered in the last 10 years). Only the bursting of the tech stock bubble and the attacks of 2001 have prevented the bull market from continuing.

The markets correctly shrugged off yesterday's election as disappointing but a small and noisy MSM blip. They will give a clearer signal later this year if the tables start to turn nationally on the GOP.