Following this month’s elections, many are fretting about the likely gridlock that will dominate the American political system. But Kenneth Fisher says gridlock is just what markets like.
“Few fathom this,” Fisher writes in a column for the UK’s Interactive Investor. “Most UK media coverage portrayed last week’s midterm election results as negative. Some articles bemoaned both parties’ inability to pass anything now. Others said the Republicans’ Senate sweep weakens Obama — bad for the world. Sociologically, most of the world wants a decisive, strong American leader.”
“Stocks don’t care about sociology, though,” he continues. “Or ideology — stocks are blind to party creed. Stocks care whether politicians meddle with free markets. In capitalist, competitive countries like America, stocks are happiest when government can’t do a darned thing.”
Fisher says that’s why markets love midterm elections, which often lead to gridlock. “The first three quarters – the midterm-year Q4 and the following Q1 and Q2 – are a sweet spot I call The 86.4% Miracle,” he says. “Why? In the S&P 500’s 88-year history, each is positive 86.4% of the time. Far higher than the 67.8% frequency of positive returns in all calendar quarters. Miraculous!”
Fisher also talks about why Obama’s lame-duck status is a positive for markets. And he offers a couple of stock picks. Among them: Volkswagen.