Do we get a triple bottom bounce or does the bottom fall out? The week of Dec. 10 – 14 is make...
In 2012, Politics Will Matter, Too
11/28/2011 12:01 am EST
President Obama is busy raising money and running full tilt for re-election, while Republicans are scrambling for a nominee to replace him. They would appear to have a good chance, with a bad economy and the President's feeble 40%-plus approval rating. But the field of candidates remains "unsettled," to say the least.
Former Massachusetts Governor Mitt Romney is the GOP establishment's favorite, and his fund-raising reflects that. He also runs well against the President in polls. But he hasn't gotten more than 25% of likely Republican voters to support him, mostly because he has been a flip-flopper on issues ranging from abortion and gay marriage to the Massachusetts health care plan that was a model for Obamacare.
Conservatives especially distrust him, wondering what he would really do as president. But one after another conservative alternative-Donald Trump, Representative Michelle Bachmann, and Texas Governor Rick Perry-flared up brilliantly only to crash and burn.
As I write this, businessman Herman Cain is leading in many polls, but questions about inappropriate behavior and campaign financing may derail his campaign, too. Representative Ron Paul, former Senator Rick Santorum, and former House Speaker Newt Gingrich all have their followings, yet none has caught fire.
They'd better soon, because things start moving quickly after New Year's, when the Iowa caucuses convene. New Hampshire, South Carolina, and Florida follow soon after, and the calendar is crowded until March 6th, when ten states hold primaries or caucuses on Super Tuesday.
The packed schedule appears to favor the well-organized and -funded Romney campaign. But his candidacy would face even bigger questions if he can't sew it up by Super Tuesday. There might even be an opening for a revival by the well-financed but disorganized Governor Perry, who has run a terrible campaign so far.
But the market has its own calendar, and that's good news for investors. Historically the stock market has done best in the third year of the four-year presidential cycle, but the election year has been second best.
Also, I found the Standard and Poor's 500 index rose by an average of 14.6% in the 14 presidential election years since 1928 when incumbent presidents ran for re-election.
The incumbents won ten of those elections, but even when they didn't, the S&P did very well. In fact, in only one of the 14 incumbent election years (1940) did stocks lose ground. This doesn't guarantee anything, but it may show that, for investors, one devil you know in a race is more appealing than two devils you don't.
Overseas, I'd watch France, where President Nicolas Sarkozy has a 37% approval rating and trails his Socialist opponent by 20 points in the polls. Yet he has been frenetically trying to save the Eurozone and France's AAA rating. If that pays off and he wins re-election next year, President Obama may take heart.
And then there's China, where they don't have elections but where a new leader, Xi Jinping, takes power in 2012. One of the Princelings (sons of Mao Zedong's inner circle), Xi is likely to be as cautious as his predecessor, Hu Jintao, was. But if another Princeling, Bo Xilai, the hardline Communist Party boss of Chongqing, gets named number two (unlikely) or to the elite Politburo Standing Committee (likely), it may well mean rockier relations with the US over currency and trade.
Remember when you could make money just by watching the ticker? Those days are long gone, for sure.Howard R. Gold is editor at large for MoneyShow.com and a columnist for MarketWatch. You can follow him on Twitter @howardrgold and read his political blog at www.independentagenda.com.
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