Economists can only predict future events by looking at historical results, and the last time we had a liberal in the White House and a GOP-controlled Congress was 1995 to 2001. During that time, our biggest worry consisted of Monica Lewinsky, Gary Condit and Lizzie Grubman; and the S&P 500 advanced 188 percent during that time.
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Fast forward to today, and our biggest worries are much more extreme: ISIS, Ebola, widening wealth gap, angry finger pointing Americans, Axis of Evil (yes, this still exists), Russia … I can go on, and on, and on. But you get the point.
To quote a line from the Bill Murray movie "Groundhog Day," I'm going to be the prognosticator of prognosticators, and say the short-term result of today's election will be bullish, but we are headed for dangerous times (which likely means a poisoned stock market in 2015).
For those who only use the likes of Facebook or US Weekly to obtain your daily news, let me give you some perspective on what has been taking place around the world in the past few weeks:
- Russia has been carrying out a very complex formation of aircraft over Europe, thus leading many in the defense industry to believe a more provocative hostile conflict is pending.
- ISIS recruitment reaches "unprecedented scale" with 15,000 foreign jihadists joining militant fighters; an increase of 3,000 since September.
- North Korea launches a Soviet-era style ballistic missile submarine, which is capable of launching nuclear weapons.
Makes you miss those Hamptons stories about Lizzie, eh?
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The point is, it doesn't matter who's in charge of Congress. Since the bombing of the USS Cole, the United States prefers to launch Tomahawk missiles into training camps than engage in a fist fight; and this kind of passive violence is the reason why our enemies are gearing up to first, engage in anti-western attacks; and second, pummel our heartbeat: America's finances.
There's no question the country is vulnerable, but we've been jaded to the point of dismissing credible warnings because we're likely willing to focus on other things like our rising 401(k) values. However, if this part of the equation is removed, the United States — and the household balance sheet — could be in for a very rough couple of years until a new president is elected in 2016.
My prediction following the election: Stocks will continue to soar as long as the homeland remains safe. Otherwise, the clues are there for all of us to remain guarded, and thus prepare our portfolios for treacherous times ahead.
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