Market Expert Matthews: I Wouldn't Buy Stocks if Democrats Win

Thursday, 30 Aug 2012 08:25 AM

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Investors sitting on the sidelines should not jump into the stock market if Democrats win in this November's elections, said Mark Matthews, head of research Asia at Bank Julius Baer.

A Republican victory would be bullish for markets, however.

"I would not buy the markets if Democrats win,” Matthews told CNBC.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

While markets won't give Republican GOP hopeful Mitt Romney a rousing approval either, they'd still prefer to see him in the White House over President Barack Obama.

"I think on the whole market would still react positively because of all the pro-business things that Romney would do that Obama wouldn't do,” Matthews said.

Specifically, many investors applaud the accommodative policies of Federal Reserve Chairman Ben Bernanke, who has moved to stimulate the economy by slashing interest rates and injecting liquidity into the financial system to further ensure borrowing costs stay low.

Loose monetary policies tend to send stock prices rising, yet Romney has said he favors replacing Bernanke when his second term is up in 2014.

"The thing markets won't like about Romney is that he has been emphatic that Bernanke will not be reappointed in 2014,” Matthews said.

Under law, the president appoints the seven members of the Federal Reserve's Board of Governors whom the Senate must confirm.

Still, such loose monetary policies may help Obama get re-elected, other market watchers say.

The S&P 500 broad stock index is currently trading around 1,400, up 74 percent since Jan. 20, 2009, the day Obama took office.

Such a strong rally might make Obama the first sitting president in the post-war era to win a second term with a jobless rate higher than 7.2 percent.

"Even though business and corporate sentiment is not good for Obama because they don't think he's been good for the economy, the fact that the market has done very well under him is a positive," said Ethan Siegal, head of The Washington Exchange, which analyzes politics for institutional investors, according to Reuters.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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