Will a GOP sweep make stocks surge?

The substantial defeat Republicans received in the 2006 midterm elections, which turned both houses over to Democrats, could have been expected to make the Dow plummet, but instead it moved only slightly that week. Slightly up. And Newt Gingrich’s Republican revolution in 1994, which brought in one of the most pro-business Congresses in decades, did not cause a surge of market enthusiasm: the Dow dropped that week.

Whether the market rides up or down over the next few days, bankers say they are hoping that a Republican victory would cause Obama to soften his stances on issues like the scope of new financial regulations and letting some Bush-era tax cuts expire. “After Gingrich took over in 1994, you had some pretty conservative proposals coming out of the Clinton White House,” says Jack Ablin, chief investment officer at Harris Private Bank. “We are talking about meet-in-the-middle moderation.”

Whatever gripes big business may have about the tone and actions of the Obama administration, Wall Street hasn’t particularly suffered since the president took office: the Dow has risen almost 20 percent since the start of his term in January 2009, and last quarter profits were better than expected for 80 percent of the S&P 500 companies, reported Bloomberg BusinessWeek. Big banks are again raking in the cash, with the top five bringing in $15.2 billion just last quarter.

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