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Stocks Enjoy Midterm Bump Today as Congress Shifts, Sessions Out

11/07/2018 3:53 pm EST

Focus: STOCKS

Gene Inger

Editor, The Inger Letter

No response from AG Sessions resignation. although I ponder whether the market (SPX) grasps the implications (if any?) of a U.S. constitutional crisis, writes Gene Inger.

The president did not address the resignation during his Wednesday press conference, even though it had occurred earlier (though obviously unknown to the press).

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If growth is to remain solid for the new year, then you’ve got to have a path forward for growth, and actual not illusive revenue gains.

These many months I have correctly noted sector sluggishness (including Housing, Autos and the Banks, with Tech/FAANG joining in as rinse & repeat distribution evolved. Hopefully that sluggishness is not leading into formal recession.

 Reuters: Wall Street surges Wednesday after midterms. Tech, healthcare rally.

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That’s the delayed implementation of Capital Spending, as CapEx has been slow at best, and deferred most commonly. I suspect the tariff and trade issue is as much at the heart of this stymied expansion. But politics are as well.

It is a probability that personal tax cuts will remain. Also, a given that one party might lean more toward moving corporate tax rates back up. That’s a combined palliative for the citizenry, while extracting more from business.  

chart 1 

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I’m not saying that’s desirable or warranted (given the deficit levels too). I am saying that the market cares how this sorts out. It has been an impediment for stocks, along with the other known-unknowns, as I’ve referred to serious issues that matter, but with variable outcomes.  

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Bottom-line: outcome of a Blue Wave versus Red Wall collision pending. Both sides may agree somewhat on regulating technology (monopoly and antitrust issues are mentioned but rarely explored by financial media) as well as concurring on the need for major infrastructure improvements.  

chart 2 

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If citizens are voting with their retirement funds and idealist youthful voters don’t show-up in droves to vote for a concept rather than being fixated on their economic well-being, then you have an electorate that will let China twist in the wind a bit longer.

That would allow the administration (or Congress) more time working, with little confidence on the part of trading partners that the U.S. government will cave in.

Stalled farm bill could move fast after House win: Reuters.

No, I don’t like some of the language used in trade battles or during the campaign and appreciate a softer, more diplomatic tone being used by some. I even suspect when Trump talks of that, he doesn’t mean solely the domestic arguments and tweets, but also how un-statesmanlike diplomacy, to a degree, has been an impediment to getting a compromise sooner.  

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