Why The Market Will Go Lower No Matter Who Wins
Thursday, October 28th, 2004
By Michael Lombardi, MBA for Profit Confidential
In my humble and conservative opinion, I believe that the stock market (specifically the Dow Jones Industrial Average) will go lower no matter who wins next week’s U.S. Presidential election.
Let me make one thing clear right up front: I am speaking strictly from an economic point of view. I won’t fall into the trap of being political in my commentaries. All I can tell you is how, from an economist’s point of view, each presidential candidate’s promises – if fulfilled – will be absorbed by the stock market. Also, as you read, please keep in mind the general bearish state of mind I have been in for the past five years.
Yes, in the last couple of days the market has rallied. From my standpoint, the rally is natural from the very oversold condition of the market. And, may I remind you that the Dow Jones Industrial Average hit a new 2004 low just last week.
If Kerry wins he vows to raise taxes. I understand Kerry talks about raising the taxes of high-income earners, but high-income earners are usually the owners of the small businesses creating the backbone of America’s economy. It’s easy: Raise taxes and people spend less. There’s a simple and direct relationship between the income people keep and the amount of money they spend. As consumers spend less, companies make less money and stocks go down. And with the high level of debt consumers are already burdened with, higher taxes may cause more financial strain.
If Bush is elected again, he promises to not raise taxes, which means our deficit will continue to rise rapidly… and the market doesn’t like too much debt. Yesterday’s media carried a report that Bush might ask for another $75 billion for the war. I wouldn’t be surprised if our projected annual deficit of $500 billion ends up being conservative, no matter who is in the Oval Office.
Hence, and I need to stress this from an economic point of view (so I don’t get e-mails telling I’m biased to one candidate or the other), it’s six on one hand, half a dozen on the other. And I’m not saying either party’s policy will directly lead to lower stock prices… but I am saying that there’s simply not much economic maneuverability available.
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
