The frenzied activity on the presidential campaign trail translated into a stagnant torpor on Wall Street, as investors dithered on the sidelines awaiting the election outcome. Escalating crude oil prices, uncertainty about economic growth, and concerns about the conflict in Iraq, all put pressure on the dollar, which declined to an eight-month low in the final week of October. Furor, but not the kind that warms the heart of investors, occurred mid-month when stockholders with positions in insurance companies took a big hit when New York Attorney General Eliot Spitzer accused industry leader Marsh & McLennan of bid rigging and fraud, cheating clients of hundreds of millions of dollars. This charge caused Marsh’s shares to plunge, dropping more than $10 billion in market value in a few days. AIG, Ace and Hartford Insurance Group were also involved in the investigation. Insurance firms immediately took a lashing similar to the one that securities brokers, mutual fund companies and banking firms took when Spitzer trained his sights on their business practices. As subpoenas and lawsuits proliferate, don’t expect this crisis to end soon. The insurance industry is facing the consequences of years of highly questionable conduct and allegedly illegal maneuverings.

By the time this reaches you the election outcome will be decided, and we’ll see very soon if the pundits are correct in their prognostications. Many Wall Street veterans have said that the election outcome will have little long-term impact on the stock market, despite the candidates’ different philosophies on taxes, trade, Social Security, and health care issues. Whatever their individual views on short- and medium-term opportunities, investment experts note that the market hates uncertainty and that, come November 3rd, one big question will have been settled. That may be true, but it seems likely that investors will remain worried - concerned about the stock market’s response to the election outcome, the economy, corporate earnings, and the Iraqi conflict. Many experts suggest that investors spend less time worrying about these issues and look to monetary policy as the most important factor.

Market Response
Several pundits have suggested that stock market performance long-term is more likely to be affected by monetary policy, and by the all-important selection of Greenspans’s successor. In the short term, immediately after the election, most analysts expect a surge of some sort with growth stocks taking the lead.

Most expect that the market would respond most favorably to a Bush victory, but many note that stocks would do fine with a Kerry victory, too. They note that the market has been stymied by an overall atmosphere of fear stoked by the election campaigns - divisive campaigning that has used fear mongering to command voters’ attention. Electioneering has stoked some fundamental fears that are detrimental to confidence in the market - Republicans elaborating on terrorism and geopolitical threats, and the Democrats stressing economic fears. This fear-engendering scenario has helped boost oil prices to all time highs. After the election, many pundits believe we’ll see a return to business as usual, to declining oil prices, a rally in stock prices, and a jump in bond yields.

Right now, investors have some great investment opportunities. Valuations have plummeted. Stocks are at some of the cheapest levels they’ve been in the past two decades - at a time when S&P earnings are up almost 20 percent for the year. Bullish analysts suggest that investors do a little research and some bargain hunting. Pay attention to earnings reports issued in late October and early November. Based on initial releases for third quarter earnings, a modest technology recovery appears to be underway for industry stalwarts like IBM and Microsoft as well as well-positioned new entries like Google. Companies that provide products and services (with the exception of consumer staples) are struggling, while business-to-business operations have posted better results.

After a summer of lackluster trading, it may be time to move in anticipation of a post-election lift-off.