How this could impact you and the markets?

Over this last number of months I have noticed the average person in the United States seems more optimistic. More people spending money, more people shopping and eating out… We are even hearing optimism in the young college grads who have struggled the most throughout this downturn. One of the hardest things in making a market prediction is consumer confidence going forward. This writer thinks there are some solid signs that MAIN STREET AMERICA finally has some optimism.

Now that the healthcare open enrollment has been a success, I think that MAIN STREET AMERICA will embrace it and that is showing up in the polls. Of the five hotly contested senate seats up for grabs, three of those democrats have reversed slightly negative poll numbers into significant positive gains. America is moving forward, I expect positive job growth into the elections and would not be shocked to see a 6.1 percent unemployment rate.

If this happens, the Democrats will hold the Senate and may potentially take the house. Any scenario where the democrats hold the Senate I believe will create a Main Street America “ground-swell” which will force political compromise. As confidence rises I will expect a number states to raise the minimum wage which will force the Republicans to act on this matter. Raising the minimum wage is good for the economy and will definitely hurt those at the top and some large corporations. The other major issue to be solved after the election is immigration reform. This is a great thing for the American tax base. This will bring people out of the shadows, this is another thing that is great for Main Street and bad for large corporations and the wealthy. The main reason why the republicans have been against this is strictly ideological. I firmly understand the issue and actually agree with the republicans. This is a 20 year old problem and pragmatism says we can’t round up 15 million illegals and send them back. So a compromise will happen.

Finally, if the above events happen, how will this affect the markets and ultimately affect you? I definitely think as far as the equity markets are concerned, they will continue to rise this year. Furthermore, I predict a sloppy upward move in the markets do to current news and predictions for the future. Unfortunately, the bottom line is investors have nowhere to put their money. I think if we look out a little further than 2014, as Main Street America strengthens, look out for a weaker stock market and a bond market that finally sells off and drives rates higher. FYI (that’s a good thing). I would also expect a stronger US currency in the future. This is good for the world.

A follow up on Ukraine

I still anticipate a political solution. The Ukrainians won’t like it but: I think this will settle with little impact to the markets. I’m betting on the godfather Vlad Putin just being calculated and not crazy. If crazy all bets off.

Chris ZalisCHRIS ZALIS
Trader – Author Rhino Report