- With 2007 coming to a close, we can officially call the "Do Nothing" 2007 Congress a "Did Nothing" bunch.
- We expect this trend to continue in 2008—removing potential for harmful legislation as a likely market risk.
With about a week to go in 2007 and most Congresspersons home for the holidays, beltway action is about wrapped up for the year. That means we can officially call the 2007 "Do Nothing" Congress a "Did Nothing" bunch.
This Congress will finish the year with one of the lowest approval ratings of all time: About 2 in 10 folks approve of their work today. That's even lower than President Bush's abysmal 30 percent-ish rating. Nonetheless, we stand and applaud their body of work (or lack thereof) this year.
Why is political inaction good for stocks? Because the mere potential for Congressional action is risky, and markets don't like potential risks. If you believe markets function best generally unfettered (as we do), then potential for new legislation is a constantly harrowing possibility. But in times of political gridlock (like today), fear of beltway action is mitigated—one less thing for investors to worry about.
(As always, MarketMinder is agnostic to political party. We don't take a side because side-taking is bias-making, and that clouds investment judgment.)
Remember all the rhetoric this year about stemming the falling dollar, protecting against Chinese imports, re-visioning the tax system, and "fixing" credit markets with sweeping regulation? All kaput in 2007.
After losing both houses of Congress last year, the Republicans got feisty. Bush finally pulled out the veto pen, and the GOP racked up a number of political victories in recent months by stonewalling Democratic initiatives. This included an extension of the AMT patch without the "paygo" program the Dems craved. The final budget turned out status quo, with no meaningful new programs.
One of the gridlock ringleaders this year was a little-known senator from Oklahoma.
One-Man Gridlock: Meet Tom Coburn, Senate's 'Dr. No'
By Sarah Lueck, The Wall Street Journal
That makes senator Coburn our new political guru. He's the Stonewall Jackson of legislation, the Dick Butkus of new regulation. When faced with proposals for new government programs, his favorite mantra is, "I can't imagine the government can be good at it." Hooray!
Even the recent energy bill which, admittedly, includes its share of new taxpayer burdens, was toned down from roar to whimper in its final form.
Editorial Staff, The Wall Street Journal
We expect more of the same in 2008. In fact, with most politicos focused on getting reelected next November, there's little chance meaningful, voter-polarizing legislation will come to the floor for a vote, let alone pass.
With all that spare time on their hands, Congress will need something to do. Allow us to help fill the void:
Here's How to Best Win at Rock, Paper, Scissors
By Fiona Macrae, News.co.au
Have a great weekend, and happy holidays.