Tuesday, October 31, 2006

Spooky Election Conspiracy?

There hasn't been this big of conspiracy since The Great Pumpkin failed to show for Linus on Halloween night. Barry Ritholz has a Conspiracy Theories entry up at The Big Picture (and realmoney).  Is the stock market going up, and are energy prices going down, because of the 2006 election?  Are the Republicans gaming the system to get their folks elected back to the House and Senate?  Barry cites a few views and of course gives his own.

My take?  (I have one, too).  I think the economy slowed due to the interest rate hikes from the Fed causing folks to spend more on interest rates for mortgages and credit cards.   This left less money in their wallets for doing other things like driving and using energy, causing energy prices to fall and the GDP to slow.  This reaction bolstered investors views that the Fed was done hiking rates and giving more motivation to invest in the stock market.  Also, summer ended and energy demand decreased.

I do believe now that the stock market is predicting a stronger GDP number in the future due to an expanding economy.  This will in turn cause energy demand to increase, as will winter demand. 

Coincidentally, this will all be after next week's elections.

How spooky is that?

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