Contrarian Take on the November 2010 Elections

July 19, 2010 7:00pm by Barry Ritholtz

Regular readers know I don’t particularly like squishy thinking or herd behavior. As such, it is no surprise that I am not a fan of politics. With the November elections less than 5 months away, I am bracing myself for the usual foolishness that accompanies such events.

There is one thing worth mentioning: Over the past few weeks, I have seen quite a few articles that make up the heart of the consensus viewpoint. And that consensus seems to be that we will see the usual by-election year gains by the out of power party, and the resulting gridlock will be good for the markets, and that will be the impetus for a strong new rally.

However, I see a very real possibility of the consensus being wrong, and any one of several surprises occurring. This came to me after reading a run of Bloomberg articles several days in a row:

Caroline Baum discussed why people hate incumbents — except for their own: Throw the Bums Out as Long as My Bum Stays Put (July 15 2010).

The public is smarter than perhaps we give them credit for: (especially since we hardly hear about W. anymore): Americans Blame Bush, Not Obama, for Deficit, Jobs, Afghan War (July 16 2010)

Lastly, I saw this: Obama’s Bull Market Intact as Gridlock Signals Gains (July 19 2010)

What happens when you combine these 3 articles? What do people expect, and what might Mr. Market do to surprise that? Is the consensus likely to be right? What is the most expected outcome? What might really shake up the consensus viewpoint?

What say ye?

Source:
Throw the Bums Out as Long as My Bum Stays Put
Caroline Baum
Bloomberg, July 15 2010
http://noir.bloomberg.com/apps/news?pid=20601039&sid=axwoWWEeGkGE

Americans Blame Bush, Not Obama, for Deficit, Jobs, Afghan War
John McCormick and Catherine Dodge
Bloomberg, July 16 2010
http://noir.bloomberg.com/apps/news?pid=20601109&sid=a_9nTgFReJXY&

Obama’s Bull Market Intact as Gridlock Signals Gains
Kelly Bit and Lynn Thomasson
Bloomberg, July 19 2010
http://noir.bloomberg.com/apps/news?pid=20601109&sid=aMCz8xwfrQXE&pos=10

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