John McCain and Hillary Clinton may have won in New Hampshire. Michigan and South Carolina are next.
But, Wall St. does not care about the primaries. Their results won’t be reflected in whether the market moves up or down. Traders are not watching the vote tallies.
What investors know now is that whoever gets the nomination will campaign until November. The winner will not be sworn in until next January. Putting together an agenda and working it through a potentially hostile Congress could take another year. By then, it is 2009.
A recession is almost certainly underway now. News from the retail, financial, auto, and housing sectors is just too poor. AT&T (T) said yesterday it was seeing softness in consumer spending. It is hard to imagine that the economy will not contract the first two or three quarters of this year. If the recession is deep, it could go on six quarters. By that time, the new president will have been in office for four months.
With no outcome from the elections likely to help the market when it needs it, Wall St. will have to concentrate its hopes on the Fed. Notes from the December meeting indicate that the agency was split on lowering rates. Some governors are still concerned about inflation and do not want to bring down rates too fast. Others think problems in the economy are so severe that rate cuts are essential.
As far as investors are concerned, Bernanke might as well be president.
Douglas A. McIntyre
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