With the antiquated Electoral College method of electing Presidents it's easy to think your personal vote is of little consequence. Unless you live in a battleground state you're stuck in a sea of Red or Blue no matter where your personal politics lie. That's the reality for the presidential election but Eric Singer, author of Trade the Congressional Effect says your vote has more power than you may think.
In this episode of Investing 101 Singer explains three reasons why it's not about the main event --electing a new president-- but it's the Congressional races, where your vote can really count and hold the key to your financial fortunes.
1. Congress Controls the American Agenda
"It's easy for the media to focus on the horse race at the top," says Singer in the attached clip. "But in fact Congress sets the agenda for the country." The executive branch is powerful but the President doesn't have the power to unilaterally dictate policy. Budgets, taxes and everything else being spoken of in the Presidential debates ultimately need to be passed by Congress.
Mitt Romney and President Obama may speak as though they call the shots but their power is only as great as their ability to persuade your representatives to vote for their proposals.
2. Congress Creates Chaos
Perhaps because of the President's limitations, Wall Street gets nervous when Congress is in session and pushing disparate agendas. Wall Street hates uncertainty and the numbers prove it.
Singer has poured over market data for the last 47 years and found some startling facts. "On the 7,900 days that Congress is in session the market has gone up less than 1% annually," Singer says.
As George Washington said, "we pour legislation into the senatorial saucer to cool it." The cooling process applies to the stock market s well. Happily for stock market participants Congress goes on vacation. When the group is out of session the market returns 16% on an annualized basis.
3. Your Vote Can End Gridlock.
According to Wall Street lore, gridlock is good for stocks. Singer says that's only half true. Measuring the S&P 500 against the price of gold, stocks do far better with a split Congress. Programs being passed tend to have an inflationary effect, meaning your real returns may not be all they seem on paper.
So gridlock is good but with a catch; during times of real crisis, leadership is a must. For that reason Singer's greatest fear is that "this time is different." In other words, if we really are on the cusp of a great financial crisis, the country will need a unified front to get us out of the mess.
Add it up and it becomes clear that the real battleground is far away from the headlines and closer to home. Don't get discouraged because you're vote doesn't move the needle in the Presidential race. Educate yourself on the local candidates and get out there and vote!
