All this postmortem election stuff is getting boring. But the stock market appears to be feasting on a McCain victory in November against either Hillary or Obama – especially Obama. Market indexes are having a terrific rally right now. In fact, they have been rallying ever since late January, when McCain emerged as the Republican nominee.
Sure, Mac may occasionally bash business, but he does want to lower the corporate tax rate. This is very good. And he also wants to keep investment tax rates low. Also very good. It’s been good enough for a stock rally, which may be capitalizing a McCain victory into share prices. Premature? Perhaps. But it’s one way to read the market’s move.
Here’s another key point: the front-page of today’s Wall Street Journal hints at the end of Fed easing moves. Another plus in the bullish column. Take a look at the price of gold. It has cratered down below the $900 mark. It peaked at $1009, just over a month ago on March 18. Meanwhile, the dollar engineered its best rally today against the euro since 2004. So maybe the US peso is dollarizing itself on the hope that the Fed will stop easing.
Finally, the stock market rally, along with a healthy rise in long-term Treasury rates, may be signaling that the “non-recession” recession will give way to a much stronger second half economy. This scenario becomes increasingly likely if a rising dollar snuffs out spiking energy prices. I hope so. Because no matter how weak, and no matter how disjointed the Democrats may look right now, Big Mac is going to need all the help he can get come November.