Markets Celebrate the GOP Wins

Today, the Dow closed at 11,434 and the S&P 500 at 1,221, which are the highest closings since the summer 2008. That is, since before Lehman failed, since before TARP and all the stimuli. It tops a trend that started in September, when it became clear that the GOP will recapture the House and the only question remaining was by how much.

The reason is not only because of the huge Republican win, but because there is a legislative gridlock now. What has hampered the recovery the most, and prolonged this recession for longer than normal, is the huge uncertainty about the future. For 18 months, we didn't know what was gonna happen, what new anti-business bills we were gonna get. It was the healthcare bill, about which we discover more and more which every week passing. It was the question or whether we'll have a cap&trade bill, another financial regulations bill, card check, and on and on. Since Obama took office, any smart business didn't plan any new operations, growth, or hiring, because they weren't sure what's gonna hit them next. There's is no credit crunch, as only 9% of businesses recently polled said that getting credit is their main problem. American companies are sitting on a record $2 trillions in cash, which for now sits much better in protected securities than risk being taken over by new Government mandates, regulations or taxes.

But the takeover of the House, while the Democrats remain in control of the Senate and the White House, means we'll have two years of legislative gridlock. That means that no major bill has any chance of passing! It's exactly what we need, what the markets need, what businesses need: for the Government to stay of our lives. We've had many recessions in the past, and the shortest ones where the ones where the Government didn't do anything, and just let the economic cycle turn everything around. When the Government got involved the most, we got FDR's Great Depression, and Carter's double recession and inflation. We probably had the fastest recovery after the 1988 market crash when Reagan, to everybody's despair, did the right thing: nothing.

So now, we'll have legislative gridlock, and no more bills to squeeze our economy and businesses. It's time to finally start recovery, and the markets showed they're ready.