In our Baltimore offices, yesterday's sweeping Republican electoral victories across the country were not someone else's story.
Long a Democratic stronghold, Maryland voted in just its fourth Republican governor in the last 60 years when it overwhelmingly chose to send Larry Hogan to the Statehouse in Annapolis.
Here in the Free State that will have a clear impact on taxes, but, more importantly, what impact will the national victories have on your money?
We checked in with some of our experts to find out...
Keith Fitz-Gerald, Chief Investment Strategist
Keith anticipated the GOP's success on the FOX Business show "Varney & Co" on Monday and offered up his opinion on what would happen if the Republicans took the Senate. When asked if we would see a solid rally through November and December, Keith stepped beyond the political arena to underscore other market conditions pointing toward a rally.
"There are a few things that are beyond the political arena, too. 1) You're going to get expectations factored into prices, especially if the GOP can actually produce a cohesive plan. 2) There are a lot of fund managers that have to chase performance, so if they want to keep their jobs and get those bonuses they've got to be buying coming into the tail-end of this year. 3) We're setting up for what really is going to be an interesting 2015. People are going to want to get ahead of the Fed."
On whether the market can hit 18,000 by year's end? "That's not inconceivable in my mind. Probably first a reset, some digestion - we're at peak-ish levels technically anyway - so I wouldn't be surprised if we get a squiggle, but then, for the reasons I mentioned, we're off to the races."
Keith later added to his comments in an exclusive Money Morning interview, noting that, "A lot of people believe 'political gridlock' is a bad thing, but in reality the markets have historically performed better when Washington isn't unified. In fact, 'gridlocked' years delivered nearly twice the annual return since 1945, according to MarketWatch. As far as I'm concerned, this opens up a lot of new opportunities and we're going to find out who the obstructionists in Washington really are.
"Either way, I believe this fall will be a watershed moment for investors and that the market will split sharply between investments that are "must-haves" and those that are simple "nice-to-have" with the former as clear winners for years to come."
Kent Moors, Global Energy Strategist
I think the switch in the Senate will have some impact but given the lack of a veto-proof vote, the gridlock may well continue.
However, three matters that probably would have moved anyway are now even more likely.
I've been talking about these for some time in Oil and Energy Investor.
1) We will begin to see a major congressional move to allow exports of American-produced crude. This will begin with inferior grades (heavy and sour oil) for which there is a more limited domestic market, but will expand. The rationale for the export ban is gone. We now have significant unconventional reserves (tight and shale oil) and the exports will support prices, tax base, and employment.
2) There will be some quickening in the approval decisions on liquefied natural gas (LNG) exports from the United States. There still needs to be a balance struck between exports and the domestic market, especially as increasing use of natural gas becomes the norm for electricity production and petrochemical manufacturing. But we will see more permissions granted.
3) The Keystone XL pipeline may benefit. However, that was going to be approved after the election anyway, given the environmental report issued a while back. Watch for some more interesting developments in crude imports from Canada by rail and internal rail transit. This has significant and widening support in all regions of the U.S.
All three of these have already provided some nice double- and triple-digit profits here. We are going to be seeing additional nice moves upcoming.
Michael Robinson, Defense & Tech Specialist
I think the huge win the GOP scored in the Senate bodes well for three main areas: defense, energy, and medical device firms.
With defense, I expect the Republican Congress to push for budget increases. President Obama's plans call for defense spending to fall to 2.3% of GDP by 2024. By comparison, The Wall Street Journal says it was 6% of GDP under Reagan and 9% under John F. Kennedy. If the GOP pushes the ratio up to just 3.3% that could mean as much as $175 billion a year.
With energy, over the six years he's been in office, the president has emphasized greater use of such alternative energy as wind and solar over conventional petroleum products like natural gas and oil.
I believe there will be a GOP push on two fronts. In the short term, the party will push for approval of the Keystone XL Pipeline. And over the next two years, the odds are strong that the GOP will present a unified front in a push to increase domestic production as a way to make America more energy independent.
With healthcare, I expect the Republicans in both houses to push for a repeal of the Affordable Care Act's 2.3% tax on medical devices. In TV interviews last night as the Senate changed hands, several prominent Republicans vowed to do just that. Some have called for Congress to gut the entire law but I think the medical device tax is their most probable win at this point.
Sid Riggs, Small-Cap Investing Specialist
For some time now the markets have been pricing in Republicans taking control of the Senate, so I don't think we should expect anything drastic in the near term.
Longer term, though, I expect traders will make the assumption, as Kent and Michael mentioned, that industries like energy and medical devices will benefit from the Republicans.
That being said, any legislation that goes too far against the President's agenda will likely get vetoed - and those gains could be short-lived.
Either way there will be opportunities, and small-caps, many vested in those very areas of growth we alluded to, should benefit from sudden "sparks" in redirected capital and we'll seize them quickly when they set up.
The fundamental market truths, however, remain the same and will help us discern real values in the small-caps. Good companies are good companies, no matter who controls the Congress or sits in the White House.
Michael Lewitt, Special Contributor
If the Republicans stand to consolidate their electoral gains, they need to act quickly to mainstream their message and prove that they can lead the country on important economic issues.
The country desperately needs economic policy initiatives to stimulate growth, and if the executive and legislative branches can't compromise, the country will face two more years of gridlock and the country will suffer.
The election will have little impact on monetary policy. Congressional testimony by Fed Chairwoman Janet Yellen may feature more criticism of the Fed's policies, which have done little to stimulate sustainable economic growth, but the Fed will continue to operate with impunity for the foreseeable future.
Markets will greet the Republican victory with open arms. However, investors should keep their eyes on the fundamentals while realizing that as long as global central banks keep printing money like drunken sailors - especially drunken Japanese sailors for the moment - the likely direction of stocks is upward despite profound concerns that investors should be proceeding cautiously.
Peter Krauth, Resource Specialist
Now that midterm elections are behind us, it's time to look at what they might mean for markets, commodities, precious metals, and currencies.
First, I expect stocks to continue higher. With the Fed unlikely to raise rates until mid-2015, look for strong stock gains ahead.
With the recent end to the Fed's bond-buying program and anticipated rising rates, I think the U.S. dollar can continue higher for a little while yet. Look for a lower yen and euro in the near to medium term as the dollar weighs on them.
Commodities (as they are priced in dollars) could continue to see pressure as the dollar continues its strength, but are likely to reverse course and begin to climb as the dollar peaks and worldwide stimulus fuel demand.
Gold and silver are likely close to a final capitulation, probably around the $1,000 level for gold and $12 for silver. Sentiment may be in the toilet, but demand and fundamentals remain stunningly bullish.
Editor's Note: Money Morning will continue to watch the market daily for the best profit opportunities as the historic 2014 elections make their critical move from the political arena to the marketplace.