This commentary originally appeared at 9:06 a.m. EST on Jan. 27 on Real Money Pro -- for access to all of legendary hedge fund manager Doug Kass's strategies and commentaries, click here.
While I continue to expect some short-term market weakness, two important developments occurred over the past few days that will have a positive intermediate-term impact on the markets and on risk assets:
- Mitt Romney has materially regained his lead in the Florida primary and the likelihood of him winning the Republican nod for presidential candidacy has measurably increased as well (based on this week's Intrade probabilities). A political regime change and Republican presidential win in November must be viewed, in the fullness of time, as market-friendly.
- The Fed announced its intention to keep interest rates low into 2014. This will have a generally positive impact on equities but will have a mixed impact on financial stocks.
Regime ChangeLet's first start with the Romney/Gingrich contest, remembering that a regime change in the November 2012 elections would be considered market-riendly and is an important precondition that I hold for the possibility that the S&P 500 regains new heights in 2012. This morning's Wall Street Journal features a headline-grabbing poll conducted in tandem with NBC (below) that gives the impression that Gingrich is a clear leader over Romney. But when we read the fine print, we see that the poll was conducted days ago (Jan. 22-24) and only 441 Republican primary voters (a small sampling) responded. I totally dismiss the poll and question why The Wall Street Journal even published this old poll.
- Intrade has Romney's chances of winning the Florida primary at 91% vs. Gingrich's chances of winning the Florida primary at 8%.
- Intrade has Romney's chances of winning the Nevada caucus at 94.5% vs. Gingrich's chances of winning the Nevada caucus at 5%.
- Intrade has Romney's chances of winning the Republican nomination for presidential candidacy at 87.5%.
- Intrade has Obama's chances of being reelected at 54%.