Correlation Between Elections and Stock Market
MALVEAUX: Few Americans are filing for first-time jobless benefits. The Labor Department reports today that the number fell to 434,000 last week. Now, that is down 21,000 from the previous week, and better than expected. It is the third straight decline, and the lowest level since early July. Now, the economy was just one of the big issues during President Obama's appearance last night on "The Daily Show" with Jon Stewart. The president defends his record. Take a listen.</s>STEWART: So, in some respects, I get your frustration with this idea that, well, jeez, are you never satisfied? But, again, the expectation, I think, was audacity, going in there and really rooting out a corrupt system. Ad so the sense is, has reality of what hit you in the face when you first stepped in caused you to back down from some of the more visionary things, like bringing a guy like Larry Summers --</s>OBAMA: First of all, if you look at how we have handled this financial crisis --</s>STEWART: Right?</s>OBAMA: -- if you had told me two years ago that we're going to be able to stabilize the system, stabilize the stock market, stabilize the economy and, by the way, at the end of this thing, it will cost less than one percent of GDP, where the S&L; crisis cost us 2.5 percent of our entire economy, a much smaller crisis, I'd say we'll take that, because we saved taxpayers a whole lot of money.</s>MALVEAUX: Well, everybody is watching to see what happens to the makeup of Washington next week. And, of course, Wall Street is also paying very close attention. That is because there is a direct correlation between elections and the stock market. Alison Kosik is on the floor of the New York Stock Exchange with details. Alison, are these two related?</s>ALISON KOSIK, CNN BUSINESS CORRESPONDENT: They really are, Suzanne, because what happens on Election Day directly affects what happens right here on Wall Street, so much so that if you go back in history and you look at how things have progressed, you'll see that in the year following a midterm election, stocks have really done pretty well. In fact, markets have really made gains in every year following the midterms of an elected president since 1939. So, what does this mean for you? It means that we could see a gain next year. I want to show you something to kind of broaden out the picture here from the "Stock Traders Almanac." It shows what the S&P; 500 returns looked like in the year after midterm elections, and you're seeing sizeable gains here, anywhere from 9 to 34 percent. And that's because when a president is in office the first two years, the president tries to push through the real tough legislation, the stuff that not everybody agrees on. With President Obama, it was clearly health care legislation and financial reform. Now, the year after a midterm is the president's third year, and that's when the president really tries to kind of build a bridge, make everybody happy, and he tends to try to make more compromises and maybe even push through more business-friendly policies. And that's something that Wall Street likes, and that's why we could see a nice rally after the midterm elections -- Suzanne.</s>MALVEAUX: Alison, does the party factor into the stock market? Does it matter if the Republicans take control of the House and the Senate?</s>KOSIK: You know, what's funny is conventional wisdom tells us that gridlock really maintains the status quo. But others say this is -- that gridlock is really good for the markets, that analysts say the division of power is good, because what it winds up doing is breeding compromise. It pushes legislators to the middle, and what you often get is legislation that's suitable for everyone, including right here, investors. And investors do like those business-friendly policies.</s>MALVEAUX: All right. Alison Kosik, thank you so much for joining us. The housing market is just one reason that the economic recovery is not taking off. Now, did homeowners get caught in the foreclosure red tape? Well, we're getting to the foundation of the crisis, at the bottom of this. One woman is telling her story. That, 20 minutes ahead.