Gridlock in Congress keeps markets happy

Associated Press

NEW YORK — The nation might not know who its next president will be, but for Wall Street, at least some of the uncertainty surrounding Election Day is over. With continued Republican majorities in the House and Senate, investors expect little change in the way the government operates during the next four years, no matter who’s in the White House.

"We’re setting things up for a nice year-end rally," said Arthur Hogan, chief market analyst at Jefferies &amp Co. "There’s such a razor-thin Republican majority that whoever wins is going to have a great deal of difficulty moving forward with much of their agenda. That gridlock is something Wall Street likes to see."

But that’s not to say the stock market’s volatility is over. Stocks fluctuated Wednesday after election officials said it would be at least another day before they know the winner of Florida’s electoral votes, which will then determine the next president of the United States.

Health care stocks rallied on expectations that the industry would be subject to few new laws or regulations in the next few years because of the makeup of Congress. But technology issues tumbled on concerns that some of the sector’s highest-priced issues won’t deliver earnings to justify their high value in a moderating economy.

Analysts said investors were still reluctant to make any big moves until the election outcome is known. A remaining source of uncertainty is the next president’s appointments, particularly at the Federal Reserve and the departments of Justice and Energy.

Fed Chairman Alan Greenspan’s term doesn’t expire until June 2004, but the new president will have to fill three vacancies on the Federal Reserve Board in the meantime.

At Justice, the incoming attorney general will inherit the Clinton administration’s case against Microsoft. A federal judge ruled in June that the software maker should be broken up because of antitrust violations, and how aggressively the government pursues the case will depend on the new president’s appointments.

Another issue for the new administration is whether oil companies will be allowed to drill in the protected Arctic National Wildlife Refuge in Alaska.

Regardless of those unanswered questions, many on Wall Street believe the markets may have gotten the best news possible: a Congress too deadlocked to spend money or to pass new laws that change the way businesses operate.

"I would argue that one of the reasons the last eight years have been so successful for the economy has been because of the gridlock," said Hogan, the Jefferies analyst. "That means there may be more to come."

Analysts also said the fact that the voting is over does take some pressure off the markets, particularly where interest rates are concerned.

The Fed has raised rates six times since the summer of 1999 to slow economic growth to more sustainable levels and restrain inflation. In recent weeks, the economy has shown increasing signs of moderating, but many analysts believe the Fed refrained from changing its current bias toward increasing rates for fear of influencing voters.

With the voting over, many now expect the Fed to declare that inflation is less of a risk to the economy when it meets next Wednesday. That could be the first step toward a future interest rate cut — a move Wall Street would certainly welcome.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Local News

FILE - A sign hangs at a Taco Bell on May 23, 2014, in Mount Lebanon, Pa. Declaring a mission to liberate "Taco Tuesday" for all, Taco Bell asked U.S. regulators Tuesday, May 16, 2023, to force Wyoming-based Taco John's to abandon its longstanding claim to the trademark. (AP Photo/Gene J. Puskar, File)
Hepatitis A confirmed in Taco Bell worker in Everett, Lake Stevens

The health department sent out a public alert for diners at two Taco Bells on May 22 or 23.

VOLLI’s Director of Food & Beverage Kevin Aiello outside of the business on Friday, May 19, 2023 in Marysville, Washington. (Olivia Vanni / The Herald)
Coming soon to Marysville: indoor pickleball, games, drinks

“We’re very confident this will be not just a hit, but a smash hit,” says co-owner Allan Jones, who is in the fun industry.

Detectives: Unresponsive baby was exposed to fentanyl at Everett hotel

An 11-month-old boy lost consciousness Tuesday afternoon. Later, the infant and a twin sibling both tested positive for fentanyl.

Cassie Franklin (left) and Nick Harper (right)
Report: No wrongdoing in Everett mayor’s romance with deputy mayor

An attorney hired by the city found no misuse of public funds. Texts between the two last year, however, were not saved on their personal phones.

Firearm discovered by TSA officers at Paine Field Thursday morning, May 11, 2023, during routine X-ray screening at the security checkpoint. (Transportation Security Administration)
3 guns caught by TSA at Paine Field this month — all loaded

Simple travel advice: Unpack before you pack to make sure there’s not a gun in your carry-on.

Heavy traffic northbound on 1-5 in Everett, Washington on August 31, 2022.  (Kevin Clark / The Herald)
To beat the rush this Memorial Day weekend, go early or late

AAA projects busy airports, ferries and roads over the holiday weekend this year, though still below pre-pandemic counts.

Logo for news use featuring the municipality of Snohomish in Snohomish County, Washington. 220118
Troopers: DUI crash leaves 1 in critical condition in Maltby

A drunken driver, 34, was arrested after her pickup rear-ended another truck late Tuesday, injuring a Snohomish man, 28.

Housing Hope CEO Donna Moulton raises her hand in celebration of the groundbreaking of the Housing Hope Madrona Highlands on Tuesday, May 23, 2023 in Edmonds, Washington. (Olivia Vanni / The Herald)
$30M affordable housing project to start construction soon in Edmonds

Once built, dozens of families who are either homeless or in poverty will move in and receive social and work services.

Smoke comes out of the roof of ReMyx'd, a restaurant on Smokey Point Drive, on Sunday, May 28, 2023, in Arlington, WA. (IAFF Local 3438)
Fire damages Arlington bar that received death threats

Arlington Police say initial indications are that fire at ReMyx’d does not appear to be intentionally set.

Most Read