The likely result would be legislative "gridlock," which historically has been bullish for stocks, notes Mark Riepe of the Schwab Center for Investment Research. His analysis of election years dating to 1953 shows that the average return of the Standard & Poor's 500 index was 14.1% per year in gridlock years, vs. a 10.4% gain when one party controlled the presidency and both chambers of Congress.
(from http://www.usatoday.com/money/markets/us/2006-10-26-winners-losers-usat_x.htm )
That's a 36% higher annual return for gridlock years-- not just bullish, but hugely bullish for the market.
"Faced with a Democratic majority in Congress, President Bush would utilize his veto pen a little more readily," says Jerry Webman, chief economist at Oppenheimer Funds.
The USA TODAY "Small Business" columnist notes: "A balance of power in D.C. would help small businesses" http://www.usatoday.com/money/smallbusiness/columnist/strauss/2006-10-30-balance_x.htm
"There is no doubt that the election of 2006 will have some fairly profound effects on the business landscape.
"The first is that because it seems likely today that the Democrats will take back the House, we will once again have divided government. I recall during the 1990s, when Democrats controlled the executive branch and Republicans controlled the legislative branch, that there was much talk of "gridlock" in Washington. But do you know what? Gridlock was not so bad. Too much power in one party, whatever the party, seems to poorly serve both that party and the country.
"So, ironically, with gridlock poised for a comeback, legislative change is in the air. The beauty of divided government is that both parties are forced to compromise to get anything done, and that alone is usually good for all of us."
So, if the Democrats win, the most likely case is to expect government spending to go down, and expect the economy to go up.
-- Franklin Jefferson ***My blog: Jefferson's Democracy*** http://franklinjefferson.blogspot.com