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5 Things To Ponder: GOP Takes Control

Lance Roberts
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This past Tuesday the conservative Republican candidates garnered a resounding victory over their Democratic challengers in even some of the "bluest" states. The message that was sent by voters was quite clear: "The real economy sucks."

Despite headline statistics, for 80% of American's the real economy remains quite weak with income growth and quality job opportunities scarce. Accordingly, since most voters are generally uniformed about which candidate is running on which platform, the majority vote by the way they "feel" at the time of election. If things are good, they tend to vote for incumbents. If not, they vote for "change."

This weekend's variety of views and opinions on what Tuesday's election blowout means to the economy and the financial markets. Is it a sign of better things ahead or the beginning of the end of the current "bull market?"

But let's start with a bit of humor before we get we get into the serious stuff. (Warning: Strong language)

Jon Stewart election 110414by lookatmyshirt

1) Republican's Lay Out Agenda by John Boehner and Mitch McConnell via WSJ Opinion

"Our priorities in the 114th Congress will be your priorities. That means addressing head-on many of the most pressing challenges facing the country, including:"

• The insanely complex tax code that is driving American jobs overseas;
• Health costs that continue to rise under a hopelessly flawed law that Americans have never supported;
• A savage global terrorist threat that seeks to wage war on every American;
• An education system that denies choice to parents and denies a good education to too many children;
• Excessive regulations and frivolous lawsuits that are driving up costs for families and preventing the economy from growing;
• An antiquated government bureaucracy ill-equipped to serve a citizenry facing 21st-century challenges, from disease control to caring for veterans;
• A national debt that has Americans stealing from their children and grandchildren, robbing them of benefits that they will never see and leaving them with burdens that will be nearly impossible to repay.

Let the fights begin.

2) Whose Economy Will It Be In 2016? by Zachary Karabell via Politico Magazine

"The ugly midterm campaign season provided one area of common ground: Americans and their candidates were almost universal in their disdain for the country’s economic performance over the past six years. In exit polls on Election Day, 78 percent of voters said they were worried about the economy, and clearly the Democrats took most of the blame.

Most likely heading into 2016 we face an overall economic picture that is just good enough to counter the collapse and crisis message, but not nearly good enough to lead to an era of good feelings. Maybe, and just maybe, that will offer an opening to someone willing finally to talk not just of two Americas, but of many Americas, some struggling mightily, some succeeding admirably, and multitudes in between. That would be a powerful message, because it would be real and true. Of that we have had precious little of late, but it may prove a winning formula for 2016."

3) Will We Get A Republican Bull Market Now? by Stephen Moore via

"It was exactly 20 years ago, in November 1994, that Republicans under the maverick leadership of Newt Gingrich and his Contract with America took over the House of Representatives for the first time in nearly half a century.

What may not be remembered is that the GOP sweep continued what became the longest and strongest stock market expansion in American history. Investors fell in love with the idea of a centrist Democrat, Bill Clinton, in the White House and a conservative Congress."


4) Will A New Congress Take The Economy Seriously by Wayne Brough via Real Clear Markets

"Yet Obama and the Democrats have done little to address the underlying long term economic problems facing the nation. Indeed, the administration and Democrat controlled Senate have focused almost exclusively on the short run, with cash injections through various stimulus programs. While this should not be surprising, given the short political time horizons that dominate decision making in Washington, D.C., it is nonetheless disconcerting when looking at long run economic trends.

So as the new Congress convenes, the economy should rank high among priorities, especially the question of long term public debt. For too long, Washington has pushed the issue on to the next Congress, leaving entitlement spending on autopilot. But the problem is only going to get worse as more of the population shifts from the labor force to retirement."

5) Will The New Congress Bring Economic Renewal by Mohamed A. El-Erian via Bloomberg

"With Republicans in control of both houses, the markets hope the stage is set for a constructive cohabitation of a Republican Congress and a Democratic president, similar to what evolved under President Bill Clinton. The late 1990s are remembered for a number of important pro-growth legislative initiatives.

There is certainly some low-hanging fruit that is ripe for bipartisan agreement, and that could be acted on quickly (such as free-trade agreements, immigration reform and the overhaul of corporate taxation). But two big things are required for this to translate into a phenomenon that would decisively improve the prospects for growth, jobs and prosperity.

First, the two parties would need to be a lot less beholden to their political bases.

Second, the two parties have to be convinced (and trust, initially and over time) that their interests would remain aligned, even while pursuing objectives that are anathema to the other."

My opinion: Those two objectives are unlikely to be met as Republican's candidates are working under a "mandate" from their base. They won elections based on strict promises to repeal/reform the ACA, lower taxes and reform immigration but not give amnesty. This is likely to end in a "sea of red-ink vetos" from the White House and ongoing bitter fighting in the months ahead.

Bonus Watch: What Do Voters Want From Congress In January via Gallup

“The enemy isn’t conservatism. The enemy isn’t liberalism. The enemy is bulls**t." —Lars-Erik Nelson, political columnist

Have a great weekend.

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