Neighbor: Hi Homer!

Homer: What’s up kid.

Neighbor: You been watching the banter going on between the Democrats and the Republicans.

Homer: Yea, I have, as a matter of fact.

Neighbor: What do you make of it?

Homer: In what way?

Neighbor: Well, how’s it going to affect the markets if Kerry beats Bush in the election? It’s a close race you know!

Homer: Yea, I know. So, let me get this straight, you come out here on this beautiful afternoon, the sun is shining, the birds are singing while I am just watching the grass grow, to ask me if the Democrat beats the Republican, how will the stock market react? Is that right?

Neighbor: Right?

Homer: I don’t know.

Neighbor: What? What do you mean you don’t know? You know everything!

Homer: No, not everything.

Neighbor: Well then, tell me who will win? What’s your best guess?

Homer: W in a landslide.

Neighbor: No way!

Homer: I thought you said I knew everything.

Neighbor: But they are neck and neck.

Homer: And, this is the end of July, not November. It has nothing to do with whether you like this guy or the other. It’s pretty clear W is conservative. His contender, also known as the new JFK, is the liberal, the most liberal United States Senator in the country. So this is a classic choice. However, Kid, as you are fond of reminding me, “what is the bottom line?” It does not make a difference to the stock market, not one wit, which one is elected. The market simply does not care.

Neighbor: What do you mean?

Homer: Under one, the market will go up. Under the other, the market will go up.

Neighbor: What the heck does that mean? You just said the same thing.

Homer: Yep. I did. You’re getting better at paying attention. On the other hand under either one, the market will also go down.

Neighbor: Come on Homer, you’re talking riddles.

Homer:  Not really. Regardless of who wins, the market will go up and down. Get it? The marker does not reflect hear and now, it reflects six months to a year down the road. What the market indicates is what it expects in the future not what it happening now.

Neighbor: So if I get this right what you are saying is that regardless of which one of these guys gets elected or reelected President the market has already discounted it and is looking toward the future. So what is it saying?

Homer: And I thought you had it for a minute. It is saying W wins. The market is moving in a narrow range, relatively stable, all the indicators are normal, conditions in the economy are improving, certain sectors are moving better than they every have, inflation has not raised its ugly head except for a tiny spike due to oil price increases, and consumer confidence is at a three year high. The market has already absorbed it. It is saying “status quo”,

Neighbor: Wow.

Homer: No wow’s kid. The smart money is on the W not the new JFK whether we like it or not.  That’s life.

Neighbor: Unbelievable!

Homer: You said it, I didn’t.