Two months and counting

In the past several months I've been discussing the political situation in the country with several of my friends. The basis of the discussions have been on how it will effect the financial situation of the markets. Well is is very interesting how things are developing. About a week ago my tendency was to believe that this market was going to nowhere fast. A little up and a little down and then flat for a while. I have made an effort to break my portfolio up into several distinct sectors and types of investments to ride out this market situation but be positioned to take advantage of the changes I anticipate coming as a result of the November elections.

This week that change began to take place but I think it may be a bit early so watch September markets carefully. I anticipated that it would not occur before October 1st but, if the changes continue like the last week, many people sitting on the sidelines will miss this run up. My forecast is for M&A activity to pick up and internal investments to occur after the election with hiring to pick up after the first of the year.....You may ask why ? Well, with a new Congress who provides incentives in housing and employment which don't increase the deficit, a more positive outlook will begin. Business / government relationships will be more friendly and with business hoarding cash, the profit numbers will be adequate enough to begin spending as soon as clarity of future risk appears. Incremental headcount will hold off until the first of the year for budgetary reasons. In the meantime, temporary help may increase to hedge against the tax, health care and penalty risks.

Finally, as interest rates stay low the housing market will begin to come back but, I would not be surprised to see 40 and 50 years mortgage terms. A new government agency to take the place of Fanny and Freddie will occur to sell these 30,40 and 50 years term mortgages as long term bonds on the stock market. 10-20% down payments on purchases will begin to make their way back as a requirement and government may guarantee the bonds if the final regulations for structuring the bonds are strict. This should provide a stable area of investment for retirement and 401K plans making the circle complete. HELOC's will be held by the banks and limited to 70-80% of the equity in the house. See my blog of 2-25-09 for additional details. With more employment providing more confidence and structured finance plans without the the nonsense low interest plans that took place in the 2000-2008 period.

Well, let us begin the two month countdown....we need a better economy real soon so watch the market to see when the country believes it is clearer that the republicans and conservatives will win a majority of the seats available. I think you will see your portfolio increase but be prepared in the right areas.