Govenor Scott Walker of Wisconsin survived a recall election tonight which was about his attempts to reign in excessive government spending. This implies that voters will seek to turn back the policies of excess government spending which could ultimately lead to lower taxes and greater economic efficiency. However, in the short run, since this would be accomplished with wage cuts and layoffs, this would be deflationary, so bond prices could go up and stocks could go down.

It is possible the Democrats in other states could copy and improve the policies of Gov. Walker, thus creating a national consensus to fix excessive government spending. This would make the U.S. the best major country in the devloped world in terms of fiscal responsibility. This will  attract capital from other countries, raising the value of the dollar and the U.S. stock market.

I wrote an article “Republican victory effects on markets“.

Investors should seek independent financial advice.

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