Market Mind Games

Emotion, risk and market behaviors

Elections and the Stock Market's Head

Why the market will go up with Romney

You realize don't you that if Romney is elected, the stock market will go up. In fact, you probably "blame" this on those greedy bankers even though you may well benefit from it.

It's really very simple. Obama is associated with the idea of the government trying to do more. Government in general is NOT associated with productivity. (Who wants to wait in line or on the phone for a driver's license, a tax question or anything else managed by the government?).

Furthermore, in reaction to what is perceived as the sins of said greedy bankers, Obama's administration has put in place the attempt to regulate almost every part of the free market. This translates into the perception of government-level productivity being imposed upon a whole host of industries.

Unfortunately, the industry that drives economies - the banks - has been waiting and waiting to find out what the regulations (rules of the game) are really going to be. I bet you didn't know that with a new election about the happen, banks still don't really know what their rules are.

Could you run a business under that scenario? What if you didn't know which language your child's teacher would speak next year? What if you didn't know if you would be even allowed to send your child to the school you want? What if you were waiting on the government to tell you if you could go on vacation and to which country?

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This is the scenario the banks have been in.

In short, many many people believe that clarity on a number of these issues will come if we elect a different President. They then figure with clarity, the banks will go about doing more of what they are supposed to do - lend. If they do more lending, the economy will improve because you will be able to decide to quit your job and start that gluten-free bakery. If you do, you will hire a person or two to help.

In other words, economics - and therefore markets - is psychology multiplied by the number of motivated people who believe they know what the rules are. 

It really is as simple as that.

 

 

Denise Shull is the author of Market Mind Games, a game-changer in how we think about anything that seems risky.

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