This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Elections Call for Investor Caution

Stocks in this article: AAPL

NEW YORK ( TheStreet) -- The most important variable for the stock market has temporarily shifted from stock price valuation to politics. All eyes are on Tuesday's midterm elections, with investors optimistic that the Tea Party movement can bring gridlock to Washington.

We believe the Republicans will win the majority in Congress. But I want to be sure of such victory before I redeploy capital in the market, and I have been selling down positions, including Apple (AAPL) 2011 options, as I discuss below.

The Tea Party movement is an interesting phenomenon. If the Tea Party had been in control during the financial crisis, then General Motors would be dissolved, the banking system would have been left on its own to collapse and the U.S. currency probably would have returned to the gold standard.

There is no question that this political movement is extreme. However, a dose of Tea Party mixed into a Republican majority in Congress with President Obama at the head of the executive branch could produce a wonderful tonic for the stock market.

If Obama shifts his policy towards the right as Bill Clinton did in 1994 and is successful at stimulating the economy through a more conservative agenda, the stock market should outperform the historical 21% average return for a third-year, first-term Democratic president. The stock market currently is banking on this optimistic scenario.

But what if all doesn't go as expected over the next few days? What if undecided voters rebel against the extremism of the Tea Party and Democrats overcome the odds to win both the House and the Senate?

This scenario is unlikely, but some Republicans have grown a little nervous about what is happening in California. Republican gubernatorial candidate Meg Whitman is getting buried in the polls by rival Jerry Brown, while Senate candidate Carly Fiorina appears unable to budge Democratic incumbent Barbara Boxer.

What election outcome is best for the stock market?

The GOP wins the House and Senate.
The Democrats maintain the House and Senate.
The GOP wins the House; the Democrats keep the Senate.
It doesn't matter who controls Congress.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,057.40 +44.51 2.21%
NASDAQ 4,743.2230 +98.9110 2.13%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs