Could it have been the new Gallup poll that drove stocks up almost 200 points on Tuesday? That blockbuster survey, regarded by many as the blue-chip gold standard for election forecasting, pointed to an unprecedented Republican landslide tsunami in the generic congressional race. That blowout could include a GOP House gain of 65 to 70 seats, and a bare-majority 10-seat pickup in the Senate.
Released Monday night, the Gallup numbers demolished the new narrative of the elite mainstream media in Washington, and their prediction that somehow the Democrats are mounting a serious comeback based on frantic Obama campaigning and a slew of multimillion-dollar negative campaign ads.
Now, I acknowledge that most market mavens attributed the rally to the better-than-expected September ISM nonmanufacturing report, which printed 10 A.M. Tuesday. And yes, this did matter for the market. The composite index came in at 53, a bit better than expected. It beat August by two points, although it was still lower than July and below the second-quarter average of 55.
Soft, but growing. No double-dip recession.
Meanwhile, the business-activity index for September services arrived in sloppier condition. It came in below the August number and well below the second-quarter level. So, no recession in the widespread services economy, but no boom either. Just a modest expansion in the services sector with no new zip.
What was supposed to be Recovery Summer, according to Joe Biden, never came to pass.
Other market commentators attributed the Tuesday rally to Ben Bernanke’s speech, delivered Monday night in Providence. The Fed head clearly moved the central bank a big step closer to QEII money-creating through new bond purchases that will inject fresh cash into the economy. However, soaring gold prices and a plunging dollar on the foreign exchanges have been discounting this since Bernanke first launched QEII in Jackson Hole, Wyoming, in late August.
So there’s nothing really new on the Helicopter Ben front. Nor can we say with any certainty that more money-printing and dollar-sinking are plusses for stocks and the economy. Longer run, I don’t think they are.
Then there are the stock pundits who pointed to the new QEI in Tokyo, also announced Monday night. This would increase the Bank of Japan’s balance sheet by roughly $60 billion, while dropping Japan’s target rate to virtually zero (just like ours). One aim of this action is to lower the exchange value of the yen (a goal of almost all currencies these days).