A Romney rally

By Robert Smith The Daily Record Newswire Here's how I feel about the stock market's prospects this summer: Decelerating growth and rising unemployment is not a recipe for increasing equity values. Add to this the fact that this is seasonally the weakest time of the year for stocks, and it doesn't look good. With that said, there are two important qualifications -- QE3 and a Mitt Romney rally. Ben Bernanke has said repeatedly that if things slow enough, the Fed stands ready to step into the breach. When the Fed prints money, it's like Miracle-Gro for the stock market. Broadly speaking, more stimulus will inflate both stock prices and commodities. However, this is an artifice and it will not last. When the printing presses grind to a halt, the market will go down. What I think will be of greater value to the markets and investors is a powerful "Romney rally" this fall. Here is why this is increasingly likely. The wheels are coming off the Barack Obama presidency fast. The result of the Wisconsin recall election is both a referendum on Obama's pro-union, tax-and-spend political vision and a harbinger of things to come. It shows that opposition to public-sector unions (Obama's biggest supporters) is broad, deep and bipartisan. One can extrapolate from this that voters across the spectrum are becoming increasingly frustrated with Obama's anti-business stance. Even prominent Democrats such as President Bill Clinton and Newark, N.J. Mayor Cory Booker have let the veil slip publically with positive remarks about Romney and Bain Capital. As a Romney presidency appears increasingly likely, businesses and investors will breathe a great collective sigh of relief and this will manifest itself in a stock market rally. For those of us old enough to have experienced it, this will be very similar to when Ronald Reagan took office in the wake of his crushing defeat of Jimmy Carter. Like Carter, Obama is becoming increasingly negative and strident. His scarcity mentality is fundamentally at odds with the psychology of abundance that animates most Americans, and this is why he will lose in the fall. Americans are not in the habit of electing divisive pessimists to the nation's highest office. Once investors and businesses realize that the Obama presidency has only months to run and not years, they will be better able to plan for the future. For the last three and a half years our lives and investment decisions have been ruled by political expediency. As Thomas Sowell so eloquently put it, "people cannot plan their lives on the basis of laws that can suddenly appear, and then suddenly disappear." Ditto for business. Why else would hiring and spending be slowing when corporate America is awash in cash? Business is simply unable to make plans and commitments on the basis of political whimsy. Because Romney is both a planner and doer, this will change. But this time around the "change" will be both substantive and meaningful. As with Reagan, it will take time. The structural changes necessary with regard to spending and taxation must be broad and deep. However, if Reagan could do it with Tip O'Neill and an overwhelmingly Democrat-filled Congress, then Romney has a head start with John Boehner and Paul Ryan. At present, with Europe in recession and our economy appearing to be headed south as well, you might be inclined to characterize the current world situation as a race to the bottom. However, with a changing of the guard in November and an end to amateur hour, I do see light on the horizon. I do believe it will be "Morning in America" again. ---------- Robert Smith is president of Peregrine Private Capital Corp. Contact him at 503-241-4949 or at www.peregrineprivatecapital.com. Published: Fri, Jul 13, 2012