US Stocks Hem and Haw Ahead of Election

Nature abhors a vacuum, and they say on Wall Street that US stocks do too.

Just a week remains before the end of a most polarizing election, and while polls and conventional wisdom may favor one side over another, the fact remains that it ain’t over till the last vote is counted, whenever that may be (and please, please, please spare us from the hanging chads, virtual or otherwise, of earlier in the millennium).

The best way to gauge what the market anticipates is to see how it is acting.

And it’s acting indecisive.  US stocks began the week just about unchanged, and now at this writing they are down a bit.  But the broader trend was, and is, lower, as equities took a leg down in October, with the Standard and Poor’s 500 Stock Index off 1.9 percent.  The tech-heavy Nasdaq lost even more, sliding 2.3 percent.  With three months of declines across the board, it would be hard to say that optimism abounds.

And yet, once the election is over, and Wall Street gets a clearer sign of who and what may reign on Capitol Hill and in the halls of Congress, stocks may get a bounce.  The Street will get an inkling about what will happen with the big banks, with foreign trade, with taxes… all of which impact the economy at large and how people feel about their equity portfolios.

Perhaps of more immediate impact to the Federal Reserve is its meeting this week, and we’ll get a sense of interest rates and whether they will hold steady, as many suspect, or whether there may be a “November surprise” in the offing.  Conventional wisdom holds that no rate hike will come until after the election; any real parsing of language will focus on the economy.