Will Gridlock in Washington Help the Market?

Is Another Republican Revolution on its way?

Many political pundits and pollsters expect the Republicans to at least take back the house, and possible the senate this November. Some are even calling for a repeat of the “Republican Revolution” that happened in 1994, where republicans steamrolled the democrats with anti-Clinton fervor. However, some say this drove the left leaning Clinton administration to the middle and set the groundwork for the historic market rally of the late 1990′s.

Could a republican house move Obama to the center ? In theory, yes. Recently, Obama has had problems getting his own party on board to vote on key issues, especially moderate to conservative democrats in swing states or conservative voting districts.. He has often relied on picking off the few remaining northeast republican left to pass bills. A republican victory in either the house or senate would halt many of Obama’s iniatiatives, which much of Wall St. calls big goverment programs. This may bode well for large caps and even penny stocks.

Many also can remember that the republicans at times held both the house and senate under President George W. Bush. That period led to a major downturn in the market that most of us still remember. This is why historically, the market has done better when we have gridlock in Washington. It doesn’t matter whether the democrats or republicans are running things, Wall St. essentially likes neither party to make the decisions.

Many experts feel that the market will rally if the democrats lose the house. Generally, there are specific sectors to watch when a political event happens. This is different, in the late 1990′s, technology stocks outperformed the stodgy old blue chips, but those blue chip names like General Electric (NYSE: GE) still did well. In other words, gridlock leads to broad based rallies and investors who are up in there core stock and mutual fund positions tend to become traders when they have gains. This could lead to the emergence of several hot penny stocks on the OTCBB.

Right now it is too early to tell which microcaps will emerge if the gridlock theory comes to fruition. But it is never too early to prepare. Right now is a great time to research this theory and you have until November to do so. As of now just scan the internet, watch cable news and read as many large cap and penny stock newsletters as you can find. Remember to stay tuned to our blogs and penny stock alerts, because being informed is the key.