Newspaper article THE JOURNAL RECORD

Stock Market Trends Indicate Political Bets Often Don't Pay

Newspaper article THE JOURNAL RECORD

Stock Market Trends Indicate Political Bets Often Don't Pay

Article excerpt

As the past few days on Wall Street have reaffirmed, playing political events for profit in the stock market can be a very tricky business.

In the weeks before the Nov. 8 election, anyone with a fondness for trading stocks might have bought a few shares in anticipation of a strong showing for the Republicans at the polls.

Those expectations were fulfilled, and then some, with the GOP's sweep to control of both houses of Congress.

But the market failed to deliver on the promise of any big post-election rally. The day after the election, in fact, the Dow Jones industrial average gained all of 1.01 points, and in the following session it fell more than that.

Analysts noted that the Street barely had time to respond to the election before attention swung back to the Federal Reserve Board.

The Fed's monetary policymakers are scheduled to meet this week amid universal expectations that they will vote to tighten credit policy further, raising key short-term interest rates by half a percentage point or more.

The central bank is presumed to feel that the economy is still strong enough to pose an inflationary threat, despite a series of tightening measures since last winter.

Even without the Fed's presence, however, market watchers aren't at all sure that stocks would have risen after the election simply on the basis of Wall Street's conservative Republican leanings.

"Congress will be more conservative than it has been for many years," said Greg Smith, investment strategist at Prudential Securities. "Domestic portfolio managers will likely consider this outcome a plus."

But there are some other aspects of the political picture that don't add up so favorably for the markets, Smith adds.

"When the party of the administration is different from the party that controls the legislative body, it increases the odds on political gridlock," he said. …

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