Political Ruminations

Chart of the Day: Markets Fear Election of Mitt Romney

From Matthew Boesler of Business Insider:

Below is perhaps the most powerful chart we've seen showing that the markets are afraid of Mitt Romney.

It shows inflation expectations – a great proxy for risk – and it looks like the market expects more inflation (supportive of risk assets like stocks) if Barack Obama is re-elected as president than if Mitt Romney were to win the election.

The idea that Romney would be bad for markets has been in ascendance in the past few weeks – and at a big investor conference this week, the concept was all the rage.

The thinking goes that Romney would want to put a someone with more hawkish – or conservative – views on monetary policy in the chairman position at the Federal Reserve.

Doing so, the market seems to fear, would be bad for risk assets because of the prospect that the "Bernanke put" would be removed, and the risk that the Fed lets markets fall without providing more stimulus would rise.

With that in mind, the chart below, via Société Générale rates strategist Fidelio Tata, shows the correlation between Obama's re-election odds on Intrade and the market's inflation expectations:

Well hey, we already know that the market prefers Democrats in the White House.

Read more at Business Insider....

Just in Time

The economy is showing more signs of improving, no doubt also proving that the world has a Liberal bias. At least that’s what Republicans are likely to claim. Via Reuters, emphasis mine:

The U.S. Dow Jones industrial average was up 217.11 points, or 1.66 percent, at 13,264.59 late afternoon in New York. The Standard & Poor's 500 Index was up 26.43 points, or 1.88 percent, at 1,429.87, its highest level in four years.

The rise in U.S. stocks was helped by reports showing American companies added staff in August at the fastest clip in five months and an improvement in service sector employment. A third report showed new claims for jobless benefits fell last week to the lowest level in a month.

U.S. private employers added a stronger-than-expected 201,000 jobs in August, according to payrolls processor ADP, while the government said new claims for jobless benefits fell last week to the lowest level in a month.

The data was the latest to hint U.S. economic growth may be recovering, and it raised chances the government's more comprehensive monthly jobs report on Friday could be stronger than economists expect.

"Today's U.S. reports all beat expectations to put a positive spin on the risks as we approach Friday's U.S. jobs data," said Michael Englund, chief economist at Action Economics in Boulder, Colorado.

So, better than expected job growth, a surge in the stock market, claims for jobless benefits fell………….Mitt Romney is likely to be crying into his cheerios tonight (or drinking on his boat).

Wall Street Loves Them Some Republicans

Think Progress on a new CNN Money survey that shows 70 percent of Wall Street analysts and money managers want a Republican president [emphasis mine]:

The stock market may have risen dramatically under President Obama, but 70 percent of Wall Street investment analysts and money managers still want a Republican president to win the 2012 election, according to a CNN Money survey released Wednesday. Wall Street prefers the loose regulatory policies and lower tax rates — particularly on investments and capital gains — favored by the Republican candidates, the survey found. Some strategists are hoping Obama wins, though. “All Republicans want to do is cut government spending, but you can’t stimulate the economy without it,” Donal Selkin, chief market strategist at National Securities, told CNN. “Wall Street is just interested in its own pocketbook.”

70 percent. In spite of a booming stock market.

Investors Reap Higher Returns Under Democratic Presidents

A picture is worth a thousand words, and this chart certainly qualifies.

From Bloomberg, we can easily discern that Democratic presidents correlate to a higher DOW, i.e., higher stock market profits for investors.

While Republicans promote themselves as the friendliest party for Wall Street, stock investors do better when Democrats occupy the White House. From a dollars- and-cents standpoint, it’s not even close.

The BGOV Barometer shows that, over the five decades since John F. Kennedy was inaugurated, $1,000 invested in a hypothetical fund that tracks the Standard & Poor’s 500 Index (SPX) only when Democrats are in the White House would have been worth $10,920 at the close of trading yesterday.

That’s more than nine times the dollar return an investor would have realized from following a similar strategy during Republican administrations. A $1,000 stake invested in a fund that followed the S&P 500 under Republican presidents, starting with Richard Nixon, would have grown to $2,087 on the day George W. Bush left office.

H/T Ashby