This Election Result Has To Be Good For Stocks

FYI | May 22 2019

By Peter Switzer, Switzer Super Report

This election result has to be good for stocks

Saturday’s election result was one for the true believers in capitalism and it seems a majority of Aussies have grasped what Bill Clinton made famous, when he campaigned on the slogan: “It’s the economy, stupid.”

Today’s story, that this election result will be good for stocks, has been beaten to the punch by a stock market that instantly added 6% to CBA, 100 points on the All Ords and so on. What the win means for the overall market going forward and what sectors are best and worst placed makes sense right now.

When stocks were crushed between September and December 22 last year, the threats were:

  • The Fed and interest rates rises. But now CNBC says that 74% of the professionals who speculate on rates are “highly confident of a cut in December”! (I think there won’t be any cuts but, as you can see, rate rises are out of the picture)
  • Trump and the trade war. This is still expected to be averted, though it’s taking longer than was hoped. (I think we’ll see a deal sooner rather than later and this will bring another leg up for stocks)
  • APRA and the Royal Commission. These two things turned off the lending taps locally and house prices fell substantially. Note, the economic growth for the last six months of the year was 0.3% in the September quarter and 0.2% in the December quarter, which adds up to 0.5%. And when you annualize that (as the RBA does), it gives you a low 1% growth rate! No wonder stocks fell!

  • The black cloud of the election was looming and this hurt both business and consumer confidence. (The win for the Coalition and the eradication of Labor’s more controversial policies for investors and business give oxygen to fuel another leg up for stocks)

The election should act to settle down nervous investors and businesses, which should help both economic growth and the stock market. And if a Trump trade deal can surface, I think stocks can keep heading north, albeit with a couple of pullbacks that should be buying opportunities.


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