(Apologies for not posting for several days. I was enjoying a 4-day ski vacation in Lake Tahoe.)
If Scott Brown wins his Massachusetts Senate seat in today's special election, I think this will mark a major tipping point in U.S. politics. (The first tipping point arguably came last year in March and April, when Obama's agenda first started running into difficulties. I remarked at the time that I thought he was far too liberal for the tastes of America's voters, that he would not find it possible to push through his agenda, and that this was a reason to be bullish on stocks, especially since they were so cheap.) Now we see the centerpiece of the liberal agenda running into a brick wall of resistance. As the WSJ editorial today points out, "The real message of Massachusetts is that Democrats have committed the classic political mistake of ideological overreach."
One of the drivers of the equity rally this past year has been the inability of the Obama administration to implement all of its far-left agenda. Going forward, one of the drivers of continued equity market gains could be the beginnings of an actual rightward shift in policies, not just a failure to move to the left. At the very least, Congress may now start operating as a divided house, and Divided Government is a thing devoutly to be wished at this point. A little less government would be a very good thing. We've come a long way in the past year, thank goodness.
UPDATE: With Brown's decisive win, this changes the political landscape to an enormous extent. I don't see how healthcare reform can pass in anything like its current form. Furthermore, I don't see how we could see any significant, hard-left measures pass between now and the November elections, when Democrats are sure to lose their commanding majority in Congress. We are now in a new era of Divided Government, and that is a Very Good Thing from the market's perspective. Obama, the One-Year Wonder, is now faced with the need to salvage his presidency. Will he choose the high road, and call for Congress to scrap the current healthcare proposal and start again from scratch, with true bi-partisan input? Or will he choose the low (Chicago) road, and go for broke? These are exciting times.