Preliminary analysis of the election results points to a
significant expansion of Republican control of the government.
Preliminary analysis of the election results points to a significant expansion of Republican control of the government. The Presidential election was close, as were many of the contested Senate and House races, but it appears that most of the time the close votes went to the Republican candidates. For the Presidential election, Senator John Kerry, having looked at the math, conceded the election the day after voting concluded. President Bush did win a majority of votes cast nationwide (about 59 million) versus Senator Kerry’s 55 million.
In the Senate, it appears that Republicans have taken four seats away from the Democrats, including a loss by the Senate Minority Leader Tom Daschle in South Dakota. This means the “razor-thin” Republican majority likely expands to 55 Republicans, 44 Democrats and one independent. This margin will likely significantly reduce, for better or worse, political gridlock in the Senate. In the House, Republicans appear to have picked up four or five seats, giving them a comfortable majority. Most House races, due to extensive gerrymandering, were largely noncompetitive. With this expansion of Congressional control, Republicans remain firmly in the driver’s seat on economic policy, regulatory issues and judicial appointments.
What does this mean to us from an investment perspective? Just getting the election behind us without having to deal with ballot chads and court fights helps considerably. We have moved beyond the election uncertainty and the threat of election eve terrorist attacks. Also, political fighting should abate. It would be great to see a bipartisan focus on tough domestic issues like Social Security and Medicare reform and a more unified approach to defense, energy and international issues. However, we still have many risks – terrorist threats, the war in Iraq and high oil prices to name a few. Clearly, the election cannot solve those problems.
The stock market moved higher post-election. The bond market is down, perhaps due to initial trading out of bonds and into stocks. Looking forward, among various industries there will be winners and losers.
