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How High?

October 10, 2012

One of the key advantages cited by proponents of the administration is the recent health of the stock market.  It’s one thing I predicted would be a factor in elections two years ago (that was a mixed prediction… the market was high but the incumbents lost).  And I’ll admit, the market has been near record highs in the recent weeks.  But that was before the Q3 earnings season started.

U.S. stocks opened flat on Wednesday as earnings season began mixed, with Alcoa Inc (AA.N) warning on slowing aluminum consumption but Yum Brands (YUM.N) raising its outlook.

There’s been a fair amount of concern over where certain sectors will be going.  So far fast food and low-cost retail seems to be doing well, but:

In the United States, third-quarter earnings continued Wednesday morning with Costco (COST, Fortune 500)reporting better-than-expected results.

Still, analysts are expecting third-quarter earnings for the S&P 500 to decline 1.2%, according to S&P Capital IQ. That would be the worst since the third quarter of 2009.

There are some rumblings in tech, including a spate of bad news for Microsoft execs, which appears to be based on execution (or lack of).  High-end retail could be interesting as well.  I’d note that all the hotels and the limited number of restaurants I hit seem to be pretty busy, so the economy is moving.  But is that because of price drops, or real growth?  We should know in the next couple weeks.

So how could this affect the elections?  Since I thought two years ago that it would be a big impact, and I was wrong, I need to adjust my thinking.  But by how much?  Strategy is about saying/doing someting, and observing the result.  While the market looks good, and the economy seems to be humming (and mine is still okay, but I’m a lot more nervous about it these days), I don’t see the average consumer confidence really jumping.  This might push people to want a change, if only to try something new.  That certainly was the case four years ago.

So I’ll call this as a positive for the Right, and a weak point for the Left, but that’ll be especially true if the market wobbles in the next two weeks.

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