The stock market is reacting to the results of yesterday’s elections very poorly with the Dow Jones off by over 250 points as of the time of the writing of this update. Is this justified? In our opinion, much of this downward movement is justified for the following reasons:

1) Uncertainty. The Bush tax cuts expire at the end of this year and there is no clear solution to the problem. With the end of the year approaching quickly, this potential tax increase will move investors away from risky assets.

2) Capital gains will be going up next year. This is significant because investors will sell appreciated assets this year in order to avoid higher capital gains rates in 2013. This selling pressure will be evident for the remaining part of the year.

3) Europe. This part of the world continues to be a concern for the investment world. The latest news is that the Greek parliament is voting on new austerity measures today. Europe will continue to be a drag on the world’s economy.

4) Regulations. The regulatory environment is already burdensome, for small businesses in particular, and will likely worsen going forward. This will be a drag to capital spending and expansion in business.

Sincerely,

Your THOR Team