Investors love divided government. See the 1,669-point surge in the Dow Jones Industrial Average (DJIA) the day after this week's elections.
When government is divided, the ability of politicians to do major damage shrinks substantially. Markets once again cheer this, particularly in the U.S. That's because the potential for legislative error coming from a government as large as ours is enormous, and is vivified by annual tax revenue, borrowing, and the budgets that emerge from both.
Which is why markets that provide investors with a look into the future grow increasingly important. A government that spends as much as the U.S.'s does must be watched ever more closely precisely due to the weightiness of each governmental action.
How to predict what's ahead from government? In answering the question, or trying to answer it, it will be said that if someone tells you that he or she can predict the policy future, they're lying. Which is why forward-seeing markets are so crucial.
Exactly because no individual can predict the present and future actions of an entity (the federal government) that employs 2.68 million individuals, and that is run by 535 elected officials with varying views a...