The Gilmo Report

November 7, 2018

November 7, 2018

Henry David Thoreau, borrowing the words of one John O’Sullivan, the founder of the United States Magazine and Democratic Review, wrote in his well-known work, Civil Disobedience, “That government governs best that governs the least.” Thoreau, one of my favorite authors of all time, took that a little further by adding, “That government is best which governs not at all.”

To some extent the market appeared to agree with this premise as the futures rallied sharply overnight after the split-decision, mid-term election results were in. The Republicans, as expected, held the Senate, increasing their majority slightly, while the Democrats, as expected, took back control of the House. This will likely produce a situation where the two sides remain at loggerheads, producing good old government gridlock.

Gridlock, of course, isn’t such a terrible thing, in my view, and the market expressed its agreement by rallying sharply. All three of the big-stock index were up over 2%, with the NASDAQ Composite Index leading the way with a 2.64% gain, helped by an even stronger NASDAQ 100 Index, which was up 3.07%. The action qualified for an O’Neil-style follow-through day, as I see it, but this is less relevant than the action of individual stocks.

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