Hot stock market tip: the Dow Jones will rise on Wednesday. (UPDATE)
America will have elected a new President and it seems about
98% probable that his party will control both Houses of Congress.
This does not mean that President Obama’s economic policies
will be any better than those of President Bush. The truth that no politician
can admit is that even the “imperial presidency” has little direct power to do
anything positive about the economy.
As one US businessman pointed
out, “In the end, the country runs itself”.
However, as FDR demonstrated in 1932, that reality matters
less than perception. It is perception, not reality, that determines market
The current perception is that there is a leadership vacuum
In fairness, that is not so much the fault of President Bush
as it is of the US Constitution. When it is known that any leader must leave
office on a specific date, he loses the power to threaten and to reward which
is the basis of his authority.
Even popular presidents have been “lame ducks” during their
last years. The perception of drift is made worse when Congress is run by a
In this respect, the ruthless British system is better: the
removal men start work within hours of a Prime Minister losing power.
Tuesday’s election will at least alter the perception of
America’s leadership. Whether the perception is fair or accurate is irrelevant.
Market confidence will improve.
Indeed, next Wednesday could be the beginning of a sustained
period of gradually increasing market stability. This is a gift to and from the
new President which has nothing to do with the man and his policies, but whether
he encourages that fragile hope or strangles it at birth will be down to him.