As the odds of President Obama’s re-election slump, the odds of a stronger stock market go up (though the next few weeks look treacherous).

A GOP president would remove the threat of higher capital gains and dividend taxes.  Moreover, the Obama administration has been aiming its guns at various industries and firms:  pharma, healthcare, oil, non-unionized Wal-Mart, etc.  All could gain some traction during the campaign.  I’m not, of course, promising a big rally — lots of other factors come in to play — oil prices, inflation, China slowdown, etc.  But all things being equal, a limp-along presidency may very well put a spring in the step of the market as we head towards winter.

During 2004, George W. Bush was in the fight for his political life, and John Kerry looked formidable (and tall).  Equity markets stayed in the doldrums until November, when the Dow and NASDAQ shot up 7 and 9 percent, respectively. Markets spent much of 2004 fretting about the higher taxes that would’ve come from a Kerry victory.  Right now, the odds for Obama’s re-election look about 50-50, but there’s plenty of room for those betting odds to falter.

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