Fisher Investments Editorial Staff

Donkeys, Elephants, and Bulls. (Oh My!)

By, 11/02/2010

Story Highlights:

  • Midterm elections are dominating media headlines of late.
  • While elections hinging largely on economic views are right ahead, the economic recovery most don't appreciate keeps chugging along globally with strength.
  • A heavy immersion in political spin can blind one to economic reality.


With midterm elections at long last here, we're awash in political news. The heated campaign season has dominated headlines for weeks now—flooding airwaves and print with Democrat donkeys and Republican elephants. Monday, financial news took a different shape—that of a bull.

Friday's US GDP report showed five quarters of growth behind us. Monday, data released globally showed strength and continued economic growth. To start, the UK's Purchasing Managers' Index (PMI) rose to 54.9 in October—solidly expansionary and accelerating to a seven-month high. Strength in export orders helped to fuel the better-than-expected growth. China's PMI also accelerated more than expected last month, rising to a six-month high—driven largely by domestic demand as export orders rose only slightly. India's PMI rose to a robust 57.2 in October, again heavily influenced by domestic demand from increasingly wealthy consumers, which was further echoed by strong September import growth of 26.1% (exports also rose 23.2%). Last but not least, the US ISM Manufacturing Index rose unexpectedly in October, increasing to 56.9 versus an expected decline to 54. Notice a trend? Global manufacturing statistics released Monday showed broad growth. Adding to these data points: Global semiconductor sales (which rose 2.9% in September) and US consumer spending (which rose modestly in September, though less than expected). In election-speak, if a poll were conducted of manufacturers today, the bulls would be far ahead—way beyond the margin for error.

While we're on the cusp of elections hinging largely on economic views, the recovery no one believes in continues to chug along much stronger than most appreciate. All the donkeys braying and elephants trumpeting about a recession that ended over a year ago make it easy for American investors to miss the sheer size and scope of this Emerging Markets-led growth. Remember, it doesn't really matter if the US is in the economic growth pole position or not. Unlike sports or politics where it's win or lose, in economics, participating in growth is of utmost importance—not where a country ranks.

Late Tuesday night, electioneering will stop (temporarily), and it seems highly likely the result will be greater gridlock—a plus for stocks. But ceasing the politicking has an additional benefit: Less spin about our supposed econo-woes from those seeking votes. You see, politics are an important factor for investors, but a tricky one. Many investors are prone to see the world through red- or blue-colored lenses. Most folks have no problem seeing politicians they ideologically disagree with as lying...well...politicians! But when politicians say things ideologically pleasing, we must remember that they too are just politicians. The end of the election season saves us from politically motivated distortions of the state of the economy. That doesn't mean everyone wakes up Wednesday to see the world just as it is. But it is the alleviation of one source of misinformation.

Remember, investing (either in stocks or otherwise) isn't a vote for or against any political party. It is a vote on the state of the global economy—which, as Monday's data illustrated, is quite healthy.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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