This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Lame Duck Congress Bodes Poorly for Stocks

Stocks in this article: CEFFX ^GSPC SPY

BOSTON ( TheStreet) -- Investors say political gridlock stemming from an energized Republican Party will bode well for the stock market.

Eric Singer, manager of the Congressional Effect Fund (CEFFX), isn't among them.

With the GOP capturing the House, the two-month lame duck session will be "incredibly dangerous" for investors, the mutual fund manager says.

"As we've had more political volatility, it has translated to less and less certainty as to how a particular piece of legislation could play out," Singer says. "The public is extremely skeptical."

While Democrat incumbents Barney Frank and Harry Reid managed to hold on to their seats in the House and Senate, respectively, several Republicans, including Arkansas' John Boozman and Wisconsin's Ron Johnson, were able to wrest control from lame duck Democrats. Newly elected leaders begin the next session Jan. 3, leaving current members less than two months to tackle key unresolved issues.

The 111th U.S. Congress and its Democratic majority made wide-reaching policy decisions, including an overhaul of the U.S. health-care system and reform of the financial industry. However, neither the House nor the Senate has yet to pass a budget. It is also uncertain whether those departing Capitol Hill will move to stop the expiration of the Bush tax cuts or if Congress will take up cap-and-trade legislation, both of which are hotly contested.

The previous lame duck session occurred in 2004 after Republicans increased their majority in both chambers, and that was a boon for investors. From that year's election on Nov. 2 through the end of 2004, the Dow Jones Industrial Average rose 8% and the S&P 500 gained 7%. Singer doesn't expect the same result this time around.

"It may turn out that the lame duck session is a whimper, but I doubt it," he says. "There is a very interesting chance that after an extraordinary election, the guys who are still in office won't just go away. If I were an investor, I'd be very concerned about my political risk during the lame duck session. There is a relentless amount of uncertainty that is created by the presence of legislation."

As manager of the Congressional Effect Fund, Singer seeks to capture the historically higher returns on out-of-session days and avoid political risks when the House and Senate are in session. It is the first mutual fund that explicitly attempts to minimize exposure to the potentially negative effect of Congressional legislation.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,658.90 -13.70 -0.08%
S&P 500 2,055.84 +4.02 0.20%
NASDAQ 4,768.7530 +10.8740 0.23%

Partners Compare Online Brokers

Free Reports

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