Wealthy investers love gridlocked congress

I found this article by Standard & Poor's Equity Research in today's financial page and typed it for you. BBB

If Republicans win next week's elections, don't rush to buy stocks.

Investors expect the elections to lead to political gridlock in Washington. For forecast is for Republicans to regain some control of Congress after two years of Democratic rule. And that a stalemate between the White House and the new Congress will mean less government regulation of business.

Investors like gridlock. So they've been buying stocks the past few weeks. "Shareholders want their companies to make unfettered profits," says Jack Ablin, chief investment officer at Harris Private Bank.

Investors might not see the downside to gridlock in a tough economy. Allbin says a paralyzed government will make it hard for Congress to pass spending efforts or tax breaks to help the economy.

Standard and Poor's chief investment strategist Sam Stovall disputes the theory that gridlock benefits stocks. His research shows that the best of times for the market has been when one party controlled the White House and House of Representatives. In the 28 years since 2945 when a single party was in control, the S&PO 500 rose an average 10.7 percent.

That's above the 3.5 percent gain during the eight years since 1945 that Congress was split between parties. It also tops the 7.6 [percent average gain for the 30 years when Congress was controlled by one party and the White House by another.

The market could blip upward if the elections point to gridlock. But even if gridlock happens, investors shouldn't expect much from stocks over the long term.