Wells Capital’s Paulsen: Gridlock Good for Economy, Financial Markets

Thursday, 08 Nov 2012 11:47 AM

By Dan Weil

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Many investors look at the possibility of continued gridlock in Washington, with a Democrat in the White House and Republicans controlling the House, as bad for the economy and financial markets.

But Jim Paulsen, chief investment strategist at Wells Capital Management, disagrees.

"The best thing for investment and the economy is when there's a split power base in Washington, that no one side has all three pillars of power," he tells Yahoo.

Editor's Note: Google Banned This Video But You Can Watch it Here

Just look at what has happened during Obama’s first four years in office, Paulsen says. In the first two years, Democrats held power, while in the past two years gridlock has ruled. The first two years were much worse for markets and the economy, he says.

“In the second two … the economy came back and the markets went to new highs. I don't think that's just a coincidence. I really think the private sector is the driver going forward, and the government is along for the ride."

Despite the fiscal cliff, the economy is strengthening, as evidenced by gains in the labor and housing market and consumer confidence, Paulsen says.

Others don’t see paralysis in Washington as such a positive factor.

"There will be an immediate shift to government gridlock and the fiscal cliff issue, and that will be a headwind for stocks," Michael Yoshikami, CEO of Destination Wealth Management in Walnut Creek, Calif., tells Reuters.

Editor's Note: Google Banned This Video But You Can Watch it Here

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