The Wall Street Journal - What impact does government policy have on the stock market?

Direction of political markets will affect the stock market

From the WSJ:

If Messrs. Perry and Bowyer are correct in their analysis, the lousy market in the last few weeks makes sense. Yes, it's partly a result of Ben Bernanke's decision not to raise interest rates. But Senator Obama is now trading as a 34% favorite – that is, bettors believe Mr. Obama is 34% more likely to win in November than Republican John McCain. That implies big tax hikes aimed at the returns on investment in the stock market.

The lesson here for investors is to keep an eye on the betting markets as a leading indicator as to the direction of stocks. "If the political winds keep blowing left," says Dan Clifton of Strategas, an investment advisory firm, "the market is going to tank. In that case, I advise, get out of the market while you still can."

This article suggests the importance of Administration policy on the stock market, and that investors should watch political prediction markets because it will affect the stock market.

Posted on 7/13/2008 2:52:01 PM by jas225Approved 7/14/2008 3:31 PM