Kass: Wave Goodbye to the Rally

The Political Climate Still Augurs Poorly for the Markets

A Democratic populist attack of "prosperity killers," portending more burdensome regulation, higher tax rates, a weakening U.S. dollar, rising protectionism and higher inflation, moves closer in time and probability. While RealClearPolitics reports that the Democratic nominees' lead has been narrowing, a "blue" November Presidential victory remains my baseline expectation and, with it, policy initiatives that could prove to be a challenge for the equity markets.

Just One of Those Crazy Flings

To be sure, many of the positive factors that I highlighted weeks ago have not disappeared, but, from my perch, the market's rise has resulted in market participants (who previously ignored the positives) to adopt an increasingly optimistic demeanor without an eye for headwinds and risks.

Accordingly, I am moving ever so slightly toward the bearish camp in my short-term market outlook for the first time in many weeks. The rally has been great fun, but, to paraphrase Cole Porter, it has just been one of those crazy flings.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.