A trend, but not of the technical sort – Bills fail, market drops, bills pass, the market drops
It seems to be a common occurrence. First with the TARP program that everyone though would pass. When the clock struck midnight before the voting date TARPs future was locked in. The stock markets were plummeting and word on the street was that TARP would pass with flying colors and send the stock markets soaring. Then it didn’t pass…
And the stock market fell. This time hugely.
Obviously by that time the house and senate were locked in. They told Americans that if this bill didn’t pass then the whole banking system would collapse and bring the economy with it. The next vote it passed and the stock markets sold off again. No one had enough confidence to buy.
Now the stimulus bill is facing the same fate. Republicans in the house slammed the bill and unanimously voted no. The result was the same, the bill was going to pass the house without any republicans voting for it as democratic members hold enough majority to pass the bill.
Now in the final hours the GOP leadership in the Senate is holding strong, they’re not going to pass the stimulus bill. But it will pass just like TARP did and just like any future economic stimulus will. But first we’re going to test the markets.
This week brings horrible news. Homesales, Consumer Confidence, Durable orders, GDP and even the employment report. This is a bad week to have a recession lingering ahead.
But with all this terrible news will come new support from the GOP and DNC alike to get the stimulus to pass. Investors will sell off when the stimulus doesn’t make it and just when lawmakers decide to act quickly to pass the bill the market will drop.
If there is one thing that is certain this bill will go through, but it won’t shake the market. You can throw billions of dollars at a problem but it won’t fix it. You simply can’t spend yourself out of being broke, no one has ever done it.
This week is going to be a wild ride. Get in those short positions while there’s still stock to short.