Election, Fed, and Stocks

Zeal ^ | 11/7/2014 | Adam Hamilton

[GilGil]

The bottom line is the massive Republican Congressional victory is not bullish for these overextended and overvalued Fed-levitated stock markets. The Republican lawmakers are going to put tremendous pressure on the Fed to normalize its bloated balance sheet and horrible zero-interest-rate policy. The Fed serves at the pleasure of Congress, and can’t risk infuriating it to launch a QE4 to rescue stock markets.

Thus the overdue major selloff is still imminent. At very best it will be a full-blown 20% correction, but far more likely is a 50% cyclical bear market unfolding over a couple years. The markets are forever cyclical, and bears always follow bulls. With the Yellen easy-money Fed’s hands now tied, the implied backstop that temporarily delayed that down cycle has vanished. It’s time for these Fed-inflated stock markets to pay the piper.

[GilGil]

The economy is already shaky and the markets are so overdue for a major correction. This is going to be a very interesting 24 months.

[VRW Conspirator]

Republicans’ fault. I knew it.

[GilGil]

Not necessarily. Presidents always get blamed when markets go south.