US mid-term elections 2006

**vincenzo** · 05/11/2006, 11:01

Hello Alain,

J'ajouterais aussi l'élément immobilier qui pourrait freiner l'économie américaine.

**rvs** · 05/11/2006, 11:46

le 100ème, je crois que c'est celui occupé par le vice président qui dirige le sénat.

**padmee** · 05/11/2006, 13:26

Salut,
Un avis parmi d'autres :

Marketmail - Friday, November 03, 2006

The third-quarter earnings season has been spectacular. As of the beginning of the week, the S&P 500 had an 18% earnings growth rate average for the third quarter, which is about 4% better than analysts anticipated. Naturally, the average stock in our growth portfolios has even more spectacular fundamentals than the average stock in the major indexes. You can view our fundamentals here.

Looking forward, we are very optimistic since we are now in the seasonally strong time of year when money pours into the stock market to fund pensions (November 1 – April 15). Meanwhile, the U.S. economy appears to be getting ready to re-accelerate after the tepid pace in the third quarter, and the stock market is now attracting capital from commodities, real estate, and other sources that are keenly aware of the third year of a president’s term, which is typically the best year for the stock market. In other words, the stock market will likely be “melting up” on order imbalances in the months ahead. By the way, I wouldn’t be surprised if we see an early “January effect” too.

As you know, we are very fundamentally focused. We are in awe of the strong sales and earnings with low-to-moderate price/earnings (P/E) ratios that are still available. Critics like to point out that the strong earnings environment is being artificially bolstered by record corporate stock buybacks. This is absolutely true. When a company buys back 10% of its outstanding stock, its earnings rise 10%. This environment is the exact opposite of the go-go 1990s, when companies were diluting their earnings by recklessly issuing stock options (often in or near the money) and diluting their earnings per share. Now companies are buying their stock back at the fastest pace I can remember. Frankly, if companies are buying back their stock (bolstering their underlying earnings in the process), then they obviously believe their internal Return on Equity (ROE) and future outlook are bright.

Critics also like to point out that the stocks market’s earnings have been predominately in the energy sector, and that if you exclude most energy stocks the earnings environment is not as strong as it appears. This is also true, which is why we owned so many energy stocks during the past nine quarters. However, things are now changing. Excluding energy, which will continue to have good, but slowing earnings, the earnings for many other industry groups are re-accelerating. As such, we don’t have to be overly dependent on one industry group. This should give us a smoother ride (less volatility).

CONSUMERS

Consumer spending accounts for approximately 70% of U.S. economic growth. Consumers now have more money in their pockets, due to lower energy costs, and the lowest unemployment rate (4.4%) in years. When you put money in a consumer’s pocket, he or she cannot help themselves. They almost always spend it! As a result, I expect a strong holiday season. Already, many retail stocks have posted impressive same store sales, which bodes well for the upcoming holiday shopping season. Wal-Mart has had some issues lately, but they appear to be more company specific than macro-economic.

“Wal-Mart is having some unique issues. Store remodeling is reportedly significantly hurting sales at impacted store [sic]. In addition, shifts in their apparel merchandise mix and advertising focus seem to be hurting their sales. They are forecasting sales in November to be flat with last year, their weakest performance in a decade. By contrast, Target is forecasting growth of 4% to 7%, better than their October performance and far better than Wal-Mart,” said Scott Hoyt at Economy.com.

About the only time consumers tend not to spend extra money is when they think they are about to get laid off. Fortunately, this scenario is not a risk at the present time since the U.S. economy is still creating new jobs. In October, payrolls rose 92K, and the unemployment rate dropped from 4.6% to 4.4%. In other words, the job market is very strong. If you’re worried that the big drop in the unemployment rate might force the Fed to raise interest rates again, don’t. The unemployment rate is a lagging indicator, and the Fed is counting on a slowdown to keep a lid on inflation.

“No big change in the Fed’s view will come from this [employment report]. They are done [raising rates],” said Ian Shepherdson at High Frequency Economics.

Back to the critics who like to throw mud on the U.S. economy. These critics like to point out that as the housing bubble bursts, it will adversely impact consumer spending. Well guess what, the average person who invests in the stock market tends not to get overly leveraged in residential real estate. As the housing bubble bursts in condos in South Florida and in other speculative markets, it actually helps the stock market because it effectively steers speculators away from real estate, and into other investments.

HOUSING & GDP

Clearly, homebuilders have been trying to move their excess inventories of unsold homes by offering buyer incentives, such as upgrades or builder-assisted financing. Many are offering vacations and new cars to help sell homes. Such incentives are not subtracted from the sales price reported to the government. However, September’s big drop in median prices is clearly a signal that builders are willing to slash home prices to help move unsold inventory.

Median new home prices dropped 9.7% in the past year through September to $217,100, which is the lowest price in two years. Additionally, this represents the largest percentage decline in median prices since December 1970. Median prices for existing single-family homes are down 2.5% in the past year, which is the largest decline ever recorded. Overall, inventories of unsold homes are still more than 50% above their normal levels, so median prices will likely remain soft until the inventory of unsold homes diminishes.

The woes in the U.S. housing market are coming home to roost. This became very obvious when the Commerce Department reported that its flash estimate for U.S. economic growth in the third quarter slowed sharply to only a 1.6% annual pace, down from 2.6% in the second quarter, and 5.6% in the first quarter. The first estimate of third-quarter GDP (there will be two subsequent revisions) was significantly below economists’ consensus estimate of 2%, and the slowest economic growth since the first quarter of 2003. The mainstream news media are now broadcasting that the U.S. economy has slowed sharply to the slowest pace in over three years.

Based on the components in the GDP report, it appears that most of the slowdown in Q3 was due solely to the housing market’s woes. For example, in the third quarter, consumer spending increased at a 3.1% rate, up from a 2.6% rate in the second quarter. Business investment increased at an 8.6% rate, compared with a 4.4% increase in the second quarter. Investments in equipment and software increased at a 6.4% rate, after falling 1.4% in the previous quarter. I should add that the U.S. trade balance subtracted 0.6% from U.S. economic growth, since exports increased 6.5%, while imports rose 7.8% (the level of imports is much higher than exports).

The drag from inventories was not as bad as many economists feared, which means the U.S. economy should accelerate in the fourth quarter, especially if businesses try to rebuild their inventories. During the third quarter, inventory accumulation continued at a healthy $50.7 billion pace, down only slightly from $53.7 billion in the second quarter. As a result, inventories subtracted only 0.1% from third-quarter GDP growth.

Stripping out inventories and trade, gross domestic purchases expanded at a 2.1% rate in the third quarter, up slightly from a 2% rate in the second quarter. Interestingly, government spending increased 2%. Federal spending increased 1.7% in Q3, including a 6.9% rise in non-defense spending, while state and local government spending increased at a 2.1% annual rate. Also interesting, there was little evidence of Detroit’s woes in the GDP report. Motor vehicle output added 0.7% to GDP growth, and consumer spending on vehicles added 0.4%. The first estimate of GDP is based on estimates of several key components, rather than on hard data. The October data on trade, inventories, and construction spending are not yet available.

The Commerce Department will issue its second estimate of third-quarter GDP on November 29, and I would not be surprised if, due to the underlying strength in every sector except housing, the third-quarter GDP report will be revised higher. In fact economists were pointing out in the wake of the third-quarter GDP report that you do not have a weak economy if consumers are spending, businesses are investing, exports are growing, and imports are strong. As a result, virtually everyone was blaming the housing market for the third-quarter GDP slowdown, but most expect economic growth to re-accelerate in the upcoming quarters.

Overall, investors should congratulate the Fed for successfully engineering a soft economic landing instead of the hard landings that have been more common.

On the interest-rate front, the Fed is not ready to ease yet, since the Personal Consumption Expenditure (PCE) price index is now growing at an “uncomfortable” 2.4% pace, the fastest since 1995, which coincidentally, was the last time the Fed managed to slow the economy without crashing it. Fed policymakers figure a few more quarters of moderate growth should reduce inflationary pressures just enough to forestall further interest rate increases. Job growth should also slow but not collapse. Consumers and businesses should keep doing what they do, namely spending, selling, and producing, which is why we are so optimistic about finishing the year on a strong note, and a prosperous 2007.

WHY 2007 WILL BE SPECTACULAR

Navellier’s best years tend to occur every four years. We were spectacular in 1987 (until October 19), 1991, 1995, 1999, 2003, so naturally 2007 should be a much stronger year than normal. The truth of the matter is the strong performance every four years isn’t necessarily due to our model. Instead, it’s the overall stock market. More specifically, it’s the third year of a president’s term. Remember those folks who like to sell in May and go away? Well trust me on this one, they are now back for the seasonally strong time of year, and should stick around for much of next year.

You are probably wondering why the stock market tends to be strong every four years. One theory is that during the early years of a president’s term, the president has to make some hard decisions, such as raising taxes and cutting spending, which can hurt the U.S. economy. However, by the time the third year of his term arrives, the U.S. economy is typically booming, so the stock market explodes.

Another theory is that after the mid-term elections, the negative rhetoric and backstabbing largely ceases, so the public is inherently more optimistic. Sometimes bi-partisanship prevails and Congress actually functions! Other times, the Congressional gridlock is so relentless that nothing gets done, so the U.S. economy is unhindered by potential interference from Congress. There is no doubt that virtually everyone is expecting more gridlock in Congress for the next couple years, so the U.S. economy should continue to grow steadily without much interference.

Another theory says that if you do not like the incumbent president, you will start to celebrate as the end of his term draws to a close, since he becomes more of a lame duck, and his power wanes. On the other hand, if you like the incumbent president, you start to celebrate that the president has the opportunity to fulfill his agenda before his term ends. In other words, no matter what side of the political spectrum that you may be on, optimism reigns in the third year, and often in the final year of a president’s term.

There are some other things to look forward to in 2007 that should help to spark the overall stock market and U.S. economy. The biggest one is that most Fed observers expect that the Fed will cut key interest rates at its Federal Open Market Committee (FOMC) meeting in March. Frankly, I believe that this is a bit premature, since the core rate of inflation, which excludes food and energy, is still high. Ironically, 42% of Consumer Price Index (CPI) is derived from housing and rental costs, so as the housing market cools, hopefully the core CPI will also cool. Well guess what, due to the recent announcement that the median price for new homes fell 9.7% in the past year, which represents the biggest drop in 36 years, there is now some hope that the core CPI might subside. As a result, the Fed might be able to lower key interest rates sometime next year.

In all likelihood, the Fed will not cut rates until the unemployment rate starts to climb.

The Fed may want to wait until at least March or later before cutting key interest rates to verify that softer oil prices are really here to stay. Oil prices typically decline in the fall and winter as demand drops. However, as spring approaches, oil prices often rise due to peak demand in the summer. Frankly, we will not have any idea whether or not oil prices will remain low until next spring arrives, so the Fed will probably want to wait to assess whether lower energy prices are here to stay before changing the course of key interest rates.

CONCLUSION

In summary, here is what 2007 is shaping up like. First, those folks who sell in May and go away are back. Furthermore, they will likely stick around longer than usual since they know that the third year of the president’s term is historically very strong. Second, Wall Street will likely view the political gridlock that characterizes the new Congress positively, since gridlock usually helps businesses to continue to grow steadily and post strong corporate earnings, without Congressional interference. Finally, the Fed might start to cut key interest rates if lower housing and energy prices help to lower the core rate of inflation. Overall, 2007 is shaping up to be a spectacular year for the stock market.

Near term, the stock market should improve after the November mid-term elections, since the negative rhetoric will cease – at least temporarily. After the elections, the mainstream news media will likely focus on the holidays, and start to report some “happy” news. This is fairly typical this time of year. When the news media is happy, investors are also happy, so it is important that we get through the mid-term elections and focus on the holidays. The bottom line is, no matter which party leads Congress, gridlock is almost guaranteed. Such an environment usually helps the business environment, and the stock market.

Consumer spending is almost guaranteed to be strong this holiday season, since consumers have more money in their pockets from lower energy prices. Since consumer spending accounts for approximately 70% of U.S. economic growth, the economic outlook is all of a sudden very bright. Thankfully, I do not have to buy just energy stocks anymore to find extremely strong earnings growth. Since energy prices have declined, the earnings in other industries have improved correspondingly. In fact, our portfolios are now better diversified as a result.

About the only negative that we foresee is that the core rate of inflation, excluding food and energy, remains stubbornly high. The recent news that productivity hit 0% and unit labor costs swelled to 3.8% in Q3 did not help. As such, the Fed will not likely cut key interest rates until the core rate of inflation subsides. A break in core inflation may emerge in the upcoming months now that median new home prices dropped 9.7% in the past year through September. This represents the largest percentage decline in median prices since December 1970. Ironically, 42% of the CPI is derived from housing and rental costs, so as housing cools, the core rate of inflation might also cool. This might allow the Fed to cut key interest rates sometime in 2007.

These positive developments, combined with continue strong earnings and historically low P/E ratios, represent a powerful one-two punch that could send our stocks significantly higher in the next year!

**tabata** · 05/11/2006, 14:19

Que penser du ralentissement immobilier américain ?

Après cinq années de hausses ininterrompues, et une appréciation d’environ 60%, le marché de l’immobilier américain semble désormais avoir atteint son point haut.

Le marché a en effet été porté au cours des dernières années par des ménages, déçus des placements actions après l’éclatement de la bulle internet, qui ont profité des faibles taux hypothécaires pour se réfugier sur l’investissement immobilier. Ce phénomène s’est traduit par une envolée sans précédent de la demande de logements neufs et anciens qui a fortement stimulé le secteur.

Le revirement du marché, anticipé de longue date par la plupart des analystes en raison de la hausse progressive des taux fed funds, semble désormais se concrétiser de manière plus marquée que prévu. C’est ce dont témoigne
l’indice national NAHB, publié au mois d’août qui a enregistré un plus bas depuis quinze ans.

Mais la situation réelle n’est probablement pas aussi problématique. Certes, les constructeurs qui avaient anticipé une poursuite de la demande devront probablement revoir leurs prix à la baisse, mais les ventes de logements anciens
sont toujours robustes, et leur prix continuent de progresser modestement.
Nous estimons donc que le ralentissement de l’immobilier, quoique prononcé, ne devrait pas entrainer de ralentissement majeur, à condition néanmoins que le marché de l’emploi se maintienne au niveau actuel et permette au consommateur
de conserver son pouvoir d’achat.

CCR Gestion

**JIPSO** · 05/11/2006, 17:14

Bonsoir,

Statistiques de S&P sur les élections de mi-mandat. Regardez bien la dernière ligne: 100% de hausse, quelque soit le résultat, c'est plutôt rassurant

. Evidemment cela reste des statistiques avec un nombre d'évènements insuffisants (8 dans le cas présent) pour conclure.

**boldos** · 05/11/2006, 17:19

Bonsoir,
Le président des US a beaucoup de pouvoirs (malheureusement), les chambres n'ont pas l'importance des chambres des démocraties européennes.
Je pense qu'il s'agit d'un petit évènement que ces élections américaines.
Bonne soirée
B

**Roque** · 05/11/2006, 21:52

Bonsoir

Je ne suis pas de ton avis boldos, le président doit bien faire passer ses budgets ... et seules les chambres sont souveraines en la matière.

Bonne soirée

**boldos** · 05/11/2006, 21:58

Merci je n'avais pas cette connaissance, je n'avais que la position guignolesque de Bush en politique extérieure. Il semble que les démocrates sient favoris mais le renouvellement n'est que partiel? La tendance peut être renversée ?
Bonne soirée
B

**Scrutime** · 07/11/2006, 11:13

Bonjour.

Hubert Védrine, 12h30, reçu sur radio BFM.

**romuald38** · 07/11/2006, 11:59

Citation de : Roque

Bonsoir

Je ne suis pas de ton avis boldos, le président doit bien faire passer ses budgets ... et seules les chambres sont souveraines en la matière.

Bonne soirée

bonjour
il est vrai qu le president peut proposer mais seules les chambres decident ,a l inverse le president peut mettre son veto sur les propositions de lois
Bien sur le systeme serait a ce moment la bloque.
Une solution est de faire comme clinton en 94 qui en echange de concessions a pu travailler avec les republicains.
Mais il semble que ni Bush, ni les democrates soient pour l instant pres a faire ce genre d "avancee"
Enfin il ne faut pas oublier que sur de nombeux etats il n y a pas que le vote des representants le 7 novembre. Un grand nombre de questions sont poses .
Ainsi dans le Vermont, l Illinois ou la Californie les electeurs ont dans leur bulletin la possibilite de demander au congres une procedure "d impeachment" contre le president et le vice president....imaginez

( ex: communaute de Pittsville :la question est :"la chambre des representants devraient des a present lancer une procedure d impeachment a l encontre des presidents et vices president" et l electeur doit repondre par oui ou non. Les representants du wisconsin seront (si la reponse est oui) mis en demeure d agir)

**Crock** · 08/11/2006, 09:17

Résultats :
Deux ans avant la course à la succession de Bush, les élections à mi-mandat ont vu les démocrates s'emparer d'une trentaine de sièges à la Chambre des représentants, quand quinze leur auraient suffi pour redevenir majoritaires.

Au Sénat, dont le tiers des sièges était renouvelé, les jeux sont plus serrés.
(Source Reuters)
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US mid-term elections 2006

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