On the web since 1997
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On the web since 1997 |
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Bulls, Bears and VotesLuke Hodgens / Powerhouse Profits -- So now it's the Republicans turn - after the Democratic National Convention, John Kerry realized a post convention "bounce" of roughly zero. Since that time, President Bush has been gaining in the polls on the heels of the swift boat ads, while Kerry exercises his manhood windsurfing and biking.While many pundits blame the lack of a post convention Kerry bounce on a tiny pool of undecided voters, the swift boat ads tell otherwise. Since the ads began, Bush has steadily increased his share of "undecided voters". With momentum in his court, Bush could realize what Kerry could not - a substantial post convention bounce. Traditionally, candidates will receive a noticeable increase in support after their conventions. Why has Kerry not received a bounce? Perhaps the undecided pool is as the DNC says - small. If this is so, why then has Bush been rallying? Logic leads to the belief that Bush's recent run in the polls is either the "tiny" undecided voters finally deciding, or those leaning towards Kerry are jumping ship. Political prophecy aside, what does the market want here? Over the past several weeks, the stock market has been in a holding pattern waiting for a candidate to take a decisive lead. The bears had their chance to push the market lower but Kerry failed to rally support after he "reported for duty". Now the bulls will get a shot at running stocks higher. The stars are now aligned for a bullish run in equities - I'll explain that in a moment, but first: Let's face it, no matter who you would like to see as president, the stock market is voting for Bush. Free flow of capital is what moves the markets. If Kerry wins, and sticks to his agenda, money must flow out of the market for one simple reason - taxes. Re-instating the double dividend tax, rolling back the Bush tax cuts and increasing the government's take will pull billions of dollars from the market and put it in Uncle Sam's back pocket. With less money in the public's wallet, consumer spending and re-investment will certainly suffer. How has the market reacted to the Kerry Convention and the Swiftie ads? Looking at the one month chart of the Dow, you can see a sharp sell off following the Democratic Convention - while Kerry received little bounce from voters, bears rallied around his cause. Once the swift boat ads began running and Bush took the lead, the Dow has bulled up 300 points. It's plain to see. If Kerry opens a big lead, the stock market will likely go down. But, if Bush widens his lead, it's almost a certainty that stocks will climb. Bush has momentum on his side, and the timing could not be better for stocks. Bush is ahead in the polls - the convention is underway - traders are returning from vacation! The stars have aligned for a run in equities. If Bush gets a bump after the convention and can widen his lead, investor confidence should increase helping the market move ahead. Combine this with the end of the traditional vacation month for traders and you have the recipe for a bull run with the volume to back it up! The possibility of a strong run in stocks is heavily dependant on the August jobs numbers due out this Friday. If strong jobs growth occurs stocks should run. But, if the current trend continues and jobs disappoint, uncertainty over the presidential election will prevail and indices will fall to the bottom of their respective trading channels. Regardless of the actual number, jobs were created in August and many of you are the beneficiaries - congratulations! If Bush does get a post convention bounce, we should hear about it in the polls and see it in the market by the middle of next week. Luke Hodgens is the editor of |
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