In Trading for a Living, Elder writes
"The ruling party inflates the economy going into the presedential election once every four years. The party that wins the election deflates the economy when coters cannot take revenge at the polls. Flodding the economy with liquidity lifts the stock market, and draining liquidity pushes it down. This is why the 2 years before a presidential election tend to be bullish, and the first 12, 18 months following an election tend to be bearish."
I am willing to admit that my economics is not great, but if the government starts spending money to expand the economy, geenral inflation will increase and the reserve bank (fed, central bank, whathaveyou) will then remove money from the economy lifting interest rates. As the RBA is a nuterual body, I would believe these effectively negate each other.
Are their any economists out there.
Secondly, if the statement by Elder is true, how does this work for our economy when we are so heavy affected by the US and China. We don't need to worry about elections to much in China but with the US election after ours, what does this mean to our market after the election later this year, will spending decrease and therefore lower the market?
I'm glad I am not an economist because then I would also have to think about what the future fund and super rule changes will also mean as there will be additional money out there.