Summer And Elections

I was thinking about what I posted over the weekend and wanted to add two items that investors need to put in the back of minds as we begin in earnest the summer season.  The first has to do with summer itself.  The 2nd has to do with the elections.

The investment world is still dominated by the big financial city centers.  Here in the US these are mostly located on the east coast and are largely found in the Boston to New York City corridor.  London is the top dog in Europe.  These places view summer as a season to get out of the hot stuffy confines of their respective cities and head to whatever piece of sod or beach they call their vacation locations.  That means as we get closer to the 4th of July and then through Labor Day most of these places get real work done on Tuesday, Wednesday and Thursday.  Monday for many is a travel day and Friday is a day devoted to a long weekend if possible.  This means that the real decision makers are gone from their desks at the beginning and the end of the week.  Those that are left are given the job of monitoring things and to not screw anything up.  Unexpected news during these times has the potential to roil markets in a way it might not occur at other times.   This phenomenon will become more pronounced as summer advances.  Wall Street virtually shuts down the last two weeks of August unless some crisis comes to a boil.  London still takes most of August off.

The other thing I'll note is the upcoming elections will start to hang over the markets as we get closer to the fall.  Right now markets aren't really all that focused on this.  Instead they are still concentrating on the business friendly aspects of the Trump Administration even if they are frustrated with the President's constant tweets and seemingly day-to-day changes in things like trade policy.

I would guess that markets would assign the odds of the Republicans retaining control of the Senate as better than 60% and rate the House staying Republican as about 50-50%.  Changes in this perception would likely change investor's perception of economic and business prospects going forward.  A Democratic "wave election" has the potential to be a market negative event as investors could perceive this as a backlash to the Administration's economic policies and put in question the President's economic agenda through the remainder of his term.  Markets could rise or fall as we get closer to election day based on these expectations.

The elections are still far off in the minds of the investment world so this is not something per se to worry about today but it is something we'll monitor more closely the closer we get to that point in time.

Back Thursday.