Stock market soars with divided election results

Clark Howard Show
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Automatic TRANSCRIPT

So divided government is where we've ended up yet again and it's interesting that stock markets here in the united states and many overseas really really like divided government. And what's happened since the election results showed we're going to continue to have a split in who runs wet in washington that stocks have gone up a lot and for the immediate future will be profit taking days. That's where the directions likely to be. Now i want to explain to you why this is the way things are playing and what it means to you with your wallet. There are a lot of people before the election. Who were really worried. That cloudy election result would be devastating to their 401k's and is i've shared with you a couple of times plus in questions from people you can't react on a short term event like that because you don't know how it's going to play out and money in your 401k. Should be for money that you're using far off in the future particularly the younger you. Are you ignore. Current noise in an economy or in a society and that advice stays the same but the big reason that stock markets love divided government is. It means there's less likely to be much more government spending which leads to larger deficits and also leads to higher interest rates. As soon as it became clear that there was going to be a split result. What happened next was interest rates on the most directly impacted rate. That economists powell follow something known as the ten year treasury which is kind of like a ten year cd for rich people and big institutions the interest rates on those declined because once it became clear that we weren't going to have a giant stimulus law come into effect with divided government. It meant that the deficits get larger than anticipated and that the government wouldn't have to find more of a deficit with more borrowing that they would find with things like the ten year note and so the result is that it's easier for stocks to maintain value or grow when the things they compete against in the marketplace like what interest rates you can earn on savings accounts pitiful and going to get more pitiful What wealthy people can earn on things like treasuries or municipal bonds. They're all affected by a divided government result. So that's why the stock market Even with some of the uncertainty we've had seems stable now. The economy is going to get a small booster shot from a stimulus law. That now looks very very likely to be passed later in november or at the latest. I would say the first week of december. This is the kind of thing that i'm crazy to go out on a limb about. Because i don't control anything that the politicians do. It's just my reading of the tea. Leaves says that we will have a smaller rather than larger stimulus. There will be passed and it is a a thing that is just the where we are and i think tomorrow maybe i want to talk about what my prognosis is for the overall economy for the foreseeable future and then longer term. Because i think that the economy was the number three issue on people's minds when they voted and in many people's minds it is the number one issue. And i wanted to give you a sense about where i see going from here.

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