Why the idea of Washington gridlock may be the best thing that can happen to the market.
Larry Glazer believes a bullish scenario is unfolding on Wall Street, just in time for the holidays.
The $3 billion money manager points to impending Washington gridlock as a major factor in his optimism. The polarized result of the midterm election, which saw the House swing to Democratic control but preserved the GOP’s hold on the Senate, might help spur market gains, Glazer said.
“Investors’ worst case fears were not materialized during midterms,” Mayflower Advisors’ managing director told CNBC’s ” Futures Now ” last week. “A split government may not be what everybody wants, but it may be what investors want.”
According to Glazer, a split Congress should prevent President Donald Trump from getting additional stimulus passed. As a result, Glazer contends it’ll put less pressure on the Federal Reserve to get more aggressive with its interest rate hikes.
“Had the Republicans really swept, you’d have more likely more stimulus coming into the market. [That] was the fear — whether it’s accurate or not. That fear means the potential for higher rates,” he said.
But now, that risk is subsiding. With uncertainty fading, Glazer is calling for stocks to rally 5 to 10 percent by year-end.
“You do have the backdrop of maybe this is the best of both worlds for investors going into the end of the year, and the beginning of next year,” Glazer added. “They can ride through this rally here.”
It’s not just the midterm results driving Glazer’s optimism. He believes lower energy prices will give consumer spending a boost in the key holiday shopping season. WTI crude is trading at low levels not seen since March.
“You really have to consider the fact that the precipitous decline in energy prices caught everybody by surprise. It’s really going to be a tailwind to keep this market afloat,” said Glazer.
And, the story may get even sweeter on Wall Street next year.
Glazer said he’s keeping an open mind about the prospect of the Dow Jones Industrial Average resuming its record run, and rising another 15 percent next year.
“We know that we get double-digit returns following gridlock a year out and potential for significantly above that two years out,” Glazer said. “A 15 percent rally puts you in spitting distance of Dow 30,000 by Labor Day. Hard to imagine for those of us who are a bit cautious. But it’s conceivable here.”
