Why Washington gridlock is good for stocks

By Gary HarloffCovestor

The polarized conservative and liberal two-party system in Washington restricts cooperation and limits lawmakers’ ability to complete jobs they are paid to complete. Similarly, the Federal health care management progress is quite slow. In contrast to former President Reagan, our federal leadership appears to be all hat and no cowboy.

Possibly because (1) Congress is deadlocked and (2) health-care cost acceleration is lower, equity markets are doing much better than average. Never mind the Fed bond buying accommodation. This year’s market average percentage gains are at multiyear highs. One might conclude that paying Congress to do nothing is a good for both Wall Street and Main Street.

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We remain bullish on S&P 500 (SPX) and NASDAQ (NDX) indexes. Gold is in a bear market this year. In my opinion, I expect bond prices to decline with increasing growth in the economy. I also don’t believe a recession or bear market is on the horizon.

Sector leadership among major asset classes is undifferentiated at this time with reasonable positive momentum. Financials lead the sector indexes, with oil, and semiconductor following. Utilities and gold have negative momentum.The U.S. dollar index is slightly positive with London and Emerging markets having negative momentum.

The U.S. bull market appears to be thriving.

DISCLAIMER:  The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.  Past performance is no guarantee of future results.

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