Galluping Stock Market

Larry Kudlow thinks the economy has less to do with the stock market surge than polls showing that Republicans are about to make huge gains in Washington and state governments:

Could it have been the new Gallup poll that drove stocks up almost 200 points on Tuesday? That blockbuster survey, regarded by many as the blue-chip gold standard for election forecasting, pointed to an unprecedented Republican landslide tsunami in the generic congressional race. That blowout could include a GOP House gain of 65 to 70 seats, and a bare-majority 10-seat pickup in the Senate.

Released Monday night, the Gallup numbers demolished the new narrative of the elite mainstream media in Washington, and their prediction that somehow the Democrats are mounting a serious comeback based on frantic Obama campaigning and a slew of multimillion-dollar negative campaign ads.

Kudlow goes on to explain some of the economic factors that might have played into the stock numbers, but the pretty much dismisses their impact:

What I do think, however, is that highly profitable companies would love to get Washington out of their hair. Anything that even slows down the federal tax-and-regulatory pawing of American firms could conceivably prompt businesses to unleash their massive cash hoard into something that more closely resembles a normal capital-goods-investment and job-hiring campaign — one that would increase economic growth and reduce unemployment.

Hence the significance of the new Gallup poll, which has political regime change written all over it.

Surveying likely voters, Gallup’s “high turnout model” shows Republicans in the lead by 53 to 40 percent. Good enough. But the more likely midterm “low turnout model,” with 40 percent of voters in attendance, shows an incredible GOP lead of 56 to 38 percent. Famed political analyst Michael Barone suggests that it won’t be 1994, but 1894 — when Republicans picked up 100 new seats in a House of roughly 350 members.

Now that’s a game-changer for politics and stocks. And that’s what I think caused the 200 point rally on Tuesday.

Such a staggering Republican victory would embody tea-party, free-market values of limited government and lower spending, taxing, and regulating As John Boehner puts it, “We can stop all the bad stuff.”

And stopping all the bad stuff would certainly enhance the future value of all those record-breaking corporate cash flows, which then can be capitalized into higher stock prices. In other words, a huge stock market rally. A veritable October surprise that could continue to year end.

The media will report any stock market gains as a sign of increased confidence in the Obama regime, but nothing could be further from the truth.