The Outcome of the 2006 Election: What Does this Mean?

Nov 9, 2006 by

Russell 3000 (Election 2006)
Dow Jones Industrial Average (Election 2006)
What do these charts mean? As we can see, things went up during Tuesday. The outcome of the election, and the democratic victory in the Senate was not really clear until Wednesday and Thursday. The market seems to have continued to rally, falling slightly on Thursday, but closing at a level still above the opening price on Monday. All in all, the election has yet to do much to the market. Clearly, a democratic victory can’t be great for Lockheed Martin, big oil, or big pharma. Nonetheless, it does not appear to have substantially dampered the market over all. Will things change more next week? Who knows. Nonetheless, the market has already accounted for the expected future changes in earnings resulting from the new politicians installed by the election.
Lockheed Martin (Election 2006)
Merck (Election 2006)
What this means is that there must be some companies whose prices reacted favorably to the outcome of the election. Readers, which companies do you think those are?

Times like these show the prudence of diversifying and buying exchange-traded funds. Until recently, LMT seemed like a great investment—one of our previous readers even recommended it! We all must remember that historical prices do not predict future performance. The outcome of the 2006 election, like any notable event, changes the going concern.

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  1. Steve

    The most obvious presumption is that the change in administration means that government funds may be reallocated to companies and projects not directly related to military uses, as well as a belief that far less time and treasure is to be expended in Iraq than on domestic issues.

    It’s also possible it’s being bouyed by foreign investors, who hope to be dealing with a far more friendly face when it comes to the United States.

  2. From what I can tell so far the change of leadership in the house will have a positive affect on the market. If money is spent on companies instead of the war I believe we will see growth in the market. If we keep spending on a war that most people are tired of the market will somewhat stagnant. Yes we see record numbers in the different markets, but if you look at the majority of the companies they are off of their own record highs which shows that investors are buying into the “other” records.

  3. MG

    As was said, big business will not benefit from the Democratic victory. However, many listed companies are small and medium sized. If the Democrats abandon supply-side economics, and incomes rise (as I believe they will), small and medium businesses will benefit. Smaller businesses tend to be more domestic, and would have more potential business. Also, the Democrats are likely to help America’s image abroad, and like Steve said, this will help investment abroad. Though it may also encourage foreign investment in the USA, and increase competition for domestic companies.

  4. Jacob R Rideout

    I think the you are overestimating the size of the democratic victory. The Senate never really was even controlled by the Republicans, and will still be in a deadlock with moderate from both side controlling power. The Presidency remains with Bush. The House, while now Democrat must deal with a president and senate that is far from controllable. This will cause deadlock and in general it is better for business when Congress just does nothing. So the markets are probably stable because the status quo is the most likely outcome of the election.

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