Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

Prognosis: Increasingly Partisan Politics Is Not Good for the Market

It is the nature of all politics that there will be factions. Henry Adams identified the nature of the beast when he said, “Politics, as a practice, whatever its professions, has always been the systematic organization of hatreds.”¹ It is one thing to systematically organize hatreds in the agrarian economy that existed in 1791, or in Henry Adams's time of the late 1800s. It is quite another to organize hatreds with all the tools of modern targeted communication available today. This in large part accounts for our general feeling that political discourse is getting out of hand.

The age of the Internet has accelerated the channeling of America in an echo chamber of reverberating opinion, leaving us all more partisan than ever. It is manifested both physically and in our self-censored news and culture diets. In The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart (New York: Houghton Mifflin, 2008) by Bill Bishop and Robert Cushing, the authors found that America is increasingly physically dividing into micro neighborhoods of homogenous political views. The nature of social targeting in advertising allows politicians to micro-target as never before. President Bush, for example, had a mailing campaign that reached almost every house in the country with a letter on the single most important issue to that household. President Obama had a legendary effort on the Internet to target his supporters, ...