The Stock Market Rally and the Election

By Doug Roberts, chief investment strategist for Channel Capital Research.

NEW YORK (TheStreet) -- The recent stock market rally occurred in a presidential election year. Is this a coincidence, or is there some relationship here? Does the battle for the White House have an impact on the financial markets?

What does this mean for the future of the market? This is the subject of this month's commentary.

Economic Improvement Slows!

Economic numbers have improved in 2012. The biggest news continues to be in the employment numbers. Nonfarm payrolls increased by only 120,000, far short of expectations for 200,000 and only half of February's 240,000. The payroll numbers have been decreasing since January.

The unemployment rate decreased to 8.2%, but the hours in the average workweek decreased as well.

Several experts are attributing this to an exceptionally mild winter. This may have led some industries, such as construction, to begin projects this winter that normally would not have begun until spring.

Consumers may have used the mild winter to begin spring shopping a bit early. This may also have contributed to the economic improvement.

In contrast to this year, the winter last year was quite severe, postponing many projects until late in the spring season. The combination of these two opposite geothermal events may have made economic comparisons between last year and this year deceptively positive.

We will soon find out whether the economic improvement is simply a seasonal anomaly or real improvement. If it is primarily seasonal, we should see the comparisons to last year continue to run into resistance.

Bonus Depreciation Again!

As we have mentioned previously, many have forgotten the government stimulus program and its effects, which are still being felt today. It may have contributed to the recent increase in manufacturing.

The "Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010" allowed for full 100% depreciation of new purchases made in 2011. This decreases to 50% depreciation in 2012. This was a tremendous incentive for people to place orders last year. Because of uncertainty and procrastination, many people waited until the last minute.