Divided Government Will Not Be Bullish for This Market – Ep. 392

JOIN PETER at the New Orleans Investment Conference

Divided Government is Good?

If the Democrats get control of Congress, which is a likely occurrence, what I’m hearing now is that this is bullish for the stock market! The stock market bulls are saying that if we have divided government that this is historically positive for the markets.  So even if the Republicans lose control of the House, and maybe even the Senate, it’s OK, because it’s divided government and that is good.

Hoping for More Deregulation

This is a bunch of nonsense. Has divided government historically been a positive? I think so, in that when you have a divided government you are less likely to make progress in legislation and since most legislation is harmful, the less legislation you get is better. But in the situation we have now, the hope is that we will have deregulation. That the progress that Trump will make will be in removing regulation.  Obviously if the Democrats take control of Congress, if you were hoping for more deregulation then your divided government will put a stop to that. So if divided government keeps government from getting smaller then it is not a good thing. If divided government stops the government from getting bigger, then maybe you could say it is positive.

Building an Entire Stock Market Rally on Trump’s Agenda

But if you have built an entire stock market rally off of the supposed success of Donald Trump and his agenda, and his ability to get his agenda through Congress, that ability is going to be substantially curtailed, if not completely eliminated if the Democrats control Congress. Nothing that Trump wants to do will get through Congress so if you’ve been betting that it would, then the Republicans losing control of Congress is definitely a bad thing.

Not The Contract with America

This is not Newt Gingrich and The Contract with America, when Republican control of Congress forced Bill Clinton to move to the right and maybe stopped some of his big government agenda that would have gotten through a Democratic Congress.  When you had the Republican Congress putting a brake on Clinton’s agenda, moving the nation more to the center, yes, that was a positive for the markets.

We Don’t Want to Even Fathom a Negative Influence on the Stock Market

But why would losing a business-friendly Republican Congress to the Democrats, to Socialist Democrats, why is that bullish for stocks? How could you possibly think that is bullish for stocks if you think what we have now is bullish, and we lose a chunk of that, that just shows you that it doesn’t matter what happens, these analysts are always going to say it’s bullish. No matter what happens, it’s bullish for stocks, because stocks are going up.  We don’t want to even fathom the possibility that anything happening would be negative for stocks.

Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.



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