A few fiery flare-ups in Washington illustrate just how hard it is to get things done in our nation's capital. But that's not such a bad thing.
Stocks should be freed of a significant source of uncertainty as the pace of new legislation slows or stops altogether.
August is here and fruit's ripening on branch and vine. Apples, nectarines, pears, peaches, and plums. There's even been a bumper crop of everyone's favorite Beltway delicacy—sour grapes. And as our frustrated feds bicker, stocks could benefit.
What bickering you wonder? Well, there's the Texas Senator who proposed a "Cash for Cluckers" program to illustrate why government shouldn't pick winners and losers in business. If the auto industry deserves aid, why not suffering poultry producers? Or our personal favorite: Treasury Secretary Geithner recently blew his top in a gale of expletives. (If only Saturday Night Live weren't on summer break!) What's got Timmy so upset? Foot-dragging financial regulators fighting the administration's proposed financial overhaul. His frustrated fit seems to punctuate the point—he doesn't actually have the power here. (Though it has been suggested he's playing political "bad cop" to set his boss up as "good cop"—over beers in the Rose Garden, of course.)
All humor aside, why should investors find Beltway bitterness easy to swallow? Because building opposition is slowing down the legislative process. And it's not just financial regulation getting held up. The administration's prized healthcare and cap-and-trade agendas face uphill battles too. Turns out, political platforms are a lot harder to accomplish in DC than campaign trail rhetoric might have us believe. And that's a great thing for stocks.
Though investors can never forecast the future with certainty, they can handicap known variables to make well-informed decisions. But what if the variables themselves keep changing? Like when Congress starts voting on all manner of new laws and requirements? The investing equation becomes infinitely more complicated with only one short-term solution—uncertainty. When legislation lurches forward, stocks waver. Sometimes quite dramatically.
With tempers flaring on the Beltway and a vocal opposition forming, stocks could benefit from the legislative loggerheads. Of course, our political friends might kiss and make up. (But don't hold your breath.) Being a politician means eternally struggling to justify your existence. The regulators don't want their regulatory kingdom to disappear—so they'll fight for it. And elected leaders must please a thousand different interest groups. When something a little too extreme surfaces, expect a voluble opposition.
We look forward to plenty of sweet summer fruit this season. But for stock investors, sour grapes may prove sweetest of all.