The Independent Market Observer

10/24/12 – Middle of the Road

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Oct 24, 2012 12:15:52 PM

and tagged Politics and the Economy, Yesterday's News

Leave a comment

“Standing in the middle of the road is very dangerous; you get knocked down by the traffic from both sides.” — Margaret Thatcher

Margaret Thatcher is not usually associated with the middle of the road, but I have always liked the above quote. And, indeed, there is no question that the middle of the road may be the place to be in American politics.

I’m thinking about this because of a couple things I have written about but had not considered together. First is the return of the Romney campaign to the middle. It is a smart and expected move, but I had thought there might be more kicking on the right when he did so; in fact, not so much. Perhaps the right is looking more at actually winning than at ideological purity. Perhaps the extremes are becoming less popular.

What makes me write this today specifically is a story on page A4 of the Wall Street Journal (WSJ), “Bachmann Fights for House Seat.” Michele Bachmann, a former Republican Tea Party presidential candidate, has seen her margins erode in her current campaign for Congress and may actually lose. This is in spite of apparently outspending her opponent, a first-time candidate, by several times.

The second story that I think is relevant here is the campaigns’ pursuit of women voters. On the same page of the WSJ is an article titled “Campaigns Court Women.” The issues it highlights are jobs and women’s health, not the ideological positions typically associated with either right- or left-wing political movements.

Finally, this leads us to the importance of the battleground states—where the electorate is so evenly balanced that no one knows what the results will be, never mind that said results will determine the outcome for the country as a whole. This also supports the notion that the race will be won in the middle and that whoever wins will also have to govern there.

Obama won in 2008, in part by promising to move past partisanship and ideology. To the extent that he has failed in that, it has created an opportunity for Romney to claim that mantle, which he has clearly attempted to do in the debates. I think this is a positive thing, and if Romney wins and follows up, the country will benefit. If Obama wins, I think he also will need to move more toward the center if he wants to govern effectively.

Although the end of ideology has been proclaimed many times, we certainly are not there today. With the campaign ending up in the middle, though, and particularly with Mitt Romney now praising Bowles-Simpson—a bipartisan initiative created by the Obama administration—there may be a de facto recognition that actual solutions will have to come from the center. If you look at the best estimates of the Romney plan, it looks distinctly like Bowles-Simpson.

The fact that many things are starting to converge on the center suggests that the center may not only hold but become the place to be.


Subscribe via Email

Crash-Test Investing

Hot Topics



New Call-to-action

Conversations

Archives

see all

Subscribe


Disclosure

The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.

Member FINRASIPC

Please review our Terms of Use

Commonwealth Financial Network®