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by Peter Switzer

Late last week my colleague on Sky News Business Channel, Mike Willesee, asked what the consequence might be for the stock market given the range of possibilities? I said if the Coalition won the market would go up.

If Labor won, there would be no change but if there was a hung parliament, there could be a fall.

Markets hate uncertainty, and short-sellers see it as an opportunity to sell the market down. Of course, if Labor won it would have been more of the same and so no local reason to move the market. However, if the Abbott team had got up in their own right, the reality of no resource tax would have surely helped resource stocks.

When making this assessment in my regular spot on the 6pm news bulletin on Sky News Business Channel, I did also suggest that if Wall Street had had a big positive or negative night then the election would have minimal impact in determining direction.

In addition, I had no idea of what kind of hung parliament we would see but this one could raise hopes for some speculators.

Loud and clear

You see, provided the Coalition can win 73 seats, which now looks likely but still could be beaten by the flow of postal votes, then I bet Abbott becomes our next Prime Minister.

My thinking is that the three independents, all ex-Nationals, represent a largely conservative constituency. They left the Nationals because their voices were being ignored but now they will be heard loud and clear.

Clearly, if Abbott negotiates like a fool he could miss the chance of being PM but given how he has surprised everyone, including the likes of Bob Hawke, who praised his campaigning efforts on Saturday night during the election coverage, I suspect he will be all ears when the independents start talking.

Post-election world

Sure the NBN could be a plus for Labor but during the election we only got our heads around the NBN versus Abbott’s ‘poor man’s version’. In a post-election world there are obviously alternative and cheaper versions of the NBN that the independents could sign up to.

But of course, the starting point will be the Coalition getting 73 seats. If they fail and Labor picks up 73 seats then the Gillard team could take the prize. This could be a messier outcome because I have difficulties of seeing Bob Katter putting up with Labor for too long. He has a short fuse and he’s politically very different from many of the Labor MPs who came from the union movement.

Coming up

On the week ahead, Wall Street is still grappling with the slow job creation and the run of largely disappointing economic data. This week all eyes will be on the Chicago Fed National Activity Index, existing home sales, a report on durable sales, new home sales, some Treasury note auctions and on Friday the second quarter GDP figures, corporate profits and consumer sentiment.

Locally, numbers on construction and capital spending will be noted to see if business is starting to spend but the prime focus will be the numbers coming out of the Australian Electoral Commission!

For advice you can trust, contact Switzer Financial Services.

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Published on: Monday, August 23, 2010