Market Preview: Ready, Set, Vote!

Tickers in this article: ^DJI AOL ^GSPC ^IXIC Z SPY

NEW YORK ( TheStreet) -- Stocks made a rather timid advance on Monday as the anticipation builds ahead of Tuesday's presidential election.

The pollsters are anticipating a tight race, and while TheStreet is predicting the incumbent will prevail , just getting the vote out of the way may be enough to shake equities loose of their recent doldrums.

"We expect a relief rally could develop after the election to celebrate the outcome of the election regardless of which party wins," wrote Oppenheimer chief market strategist John Stoltzfus in emailed commentary on Monday. "The elimination of investor hesitancy to take actions ahead of the election should be positive for the market near term. Beyond the election, of course, lies the fiscal cliff and the need for constructive near-term action. Stay tuned."

The conventional wisdom, however, seems to think that Wall Street would look more favorably on a victory by Republican candidate Mitt Romney but Julian Jessop, chief global economist at Capital Economics pointed out that there are cons to go with the obvious pro-business pros of the former buyout king ending up in the White House.

"Mitt Romney's plans would tax equities more favourably and lighten the burden of regulation on the energy sector," he said. "Nonetheless, the margin of victory and the outcome of the elections for Congress will matter too, especially in dealing with the more immediate dangers posed by the 'fiscal cliff.' Any boost from Romney's pro-business stance would also need to be weighed against the additional uncertainty that might be created by more aggressive policies towards China or Iran, although we would expect him to move quickly to ease fears of a change in tack at the Fed."

Jessop said what happens in Congress could end up being "pivotal."

"The Republicans currently have a large majority in the House of Representatives, while the Democrats control the Senate albeit only by a slim margin," he said. "A Republican clean-sweep is therefore possible and would clearly be the preferred outcome in equity markets."

The most likely scenario, Jessop said, is that Congress will remain divided, and if that happens, the margin of victory for winner of the presidential election will come into play, determining what kind of mandate Obama or Romney is perceived as having when engaging in inevitable tussles with a split Congress.

"In this scenario, the larger the margin of victory for either candidate, the greater his authority, including in negotiating a deal to avoid the 'fiscal cliff,'" he said, adding later: " ... the markets might welcome any clear outcome regardless of who actually takes the White House."

Jessop also took issue with the idea that Romney being in means Federal Reserve Chairman Ben Bernanke is on his way out.

Usage of this site is governed by TheStreet's Terms of Use available here. Information collected on this site may be collected by TheStreet and OC Register. TheStreet's use of information collected on this site will be governed by TheStreet's privacy policy available here. OC Register's use of information collected on this site will be governed by OC Register's privacy policy available here. If either TheStreet's or OC Register's privacy policy have provisions that are more restrictive than the provisions of the other party's privacy policy, such more restrictive provisions shall not apply to such other party.

Copyright © 2012 Orange County Register Communications. All Rights Reserved.
Site Help | Site Map