In his Game Plan last Friday, Cramer said the most important stock catalyst this week would be the Massachusetts Senate special election. And he was right. Except the rally fueled by a possible Republican win was supposed to come after the results were in, not before.
As Massachusetts voters went to the polls, choosing between Republican State Senator Scott Brown and State Attorney General Martha Coakley to fill the seat left vacant by Ted Kennedy’s passing, the Dow, Nasdaq and S&P 500 shot higher. Wall Street apparently had placed its bet on Brown’s victory, hoping it would tilt the balance of power in Washington and halt many of President Obama’s plans – for health care, climate change, unions – which investors saw as unfriendly to business.
The problem, though, is that Tuesday’s gains were stolen from Wednesday. So “Brown better win or else there’s no tomorrow” for this rally, Cramer said earlier during Stop Trading!.
The Mad Money host’s prediction of a “gigantic rally” following a Coakley loss received a considerable amount of attention, though Cramer's not about to make this a political statement. He's not pro-left or right, he's pro-money. And there is little doubt that a Brown win would, again, slow the Democratic agenda and make life easier for American businesses.
For instance, Brown would end the Democrats’ filibuster-proof majority in the Senate and possibly kill health-care reform. That would boost the sector’s stocks, which have been under enormous pressure during the issue’s debate in Washington.
The same goes for “card check,” or the Employee Free Choice Act, which is supposed to make it easier for workers to unionize. But more unions would hurt the banks, whose tellers aren’t organized, and Walmart, which is a non-union company.
And the list goes on: President Obama’s cap-and-trade plan chooses lower carbon emissions over jumpstarting the economy. He wants to tax banks that barely have enough capital to start loaning again. And he prefers so-called clean coal, which Cramer has called a myth, over natural gas, a cleaner, more plentiful and more viable fuel than oil that the US hasn’t yet used to its fullest potential.
Democratic or Republican, Cramer said, investors fear one-party rule because it’s bad for stocks. After all, President George W. Bush allowed unregulated markets to generate arguably the worst downturn since the Great Depression. Now it just happens to Obama and the Dems who control Washington.
In the end, what Wall Street wants is political gridlock, which is “nirvana for investors,” Cramer said. When there’s no clear majority pushing its agenda, Washington becomes less of a factor.
“Gridlock is what gave us those fantastic rallies during the Clinton years,” Cramer said, and “maybe it’s coming back.”
Call Cramer: 1-800-743-CNBC
Questions for Cramer? email@example.com
Questions, comments, suggestions for the Mad Money website? firstname.lastname@example.org