Independent Investment Advice Blog

Iowa Caucus May Damage Your Portfolio: Independent Financial Advice

    Tonight Iowa voters will vote in a caucus system in the nation’s first primary for the 2012 presidential contest.

    If the candidate chosen in Iowa is an unreliable, unproven one with an abrasive non-mainstream approach then the risk is that Obama will beat the Republicans and the risk would be that four more years of Obama might not be the best outcome for stocks. Many of the Republican candidates have tendencies to be somewhat abrasive or controversial which could cause the Republican nominee to loose. In the U.S. presidential election the winner is often the one who is the least controversial, least offensive, most bland and most well-known. Thus the campaign style of many of the Republicans is something that scares the stock market. Perhaps today’s big 1.55% gain for the SP is due to the market’s anticipation that a strong candidate will be chosen by the voters. A strong candidate could reduce risk for the market by working to reduce job killing tax increases scheduled for January, 2013.

     The biggest economic problem is an intractable high rate of unemployment. In less than year taxes will be much higher, which implies a recession is coming. So even if a Republican president can reduce the risk of higher taxes the problems are so great that a Republican president may have to accept tax increases. Thus the outcome of the election may not be as important as it seems because the budget deficit is a gigantic bipartisan problem that can’t be solved by one party alone. The need to raise taxes will result in a recession which in turn means less tax revenue, thus the economy will become trapped into a debt and deflation Japan-style long term Soft Depression.

    I wrote an article “Bear forecasts a bullish stock market”.

     Investors should seek independent financial advice.