VIRGINIA BEACH, VA, November 8, 2006 -- Yesterday’s mid-term elections may have produced a seismic power shift in Congress, but it will have little impact on the stock market, says Jim Flinchum, a Virginia Beach-based expert on economics and investing.

"The economy remains structurally sound, and the Republicans are not powerless. Tax treatment of capital gains and dividend income will continue to be kinder than tax treatment of salaries for at least two years. Even the expiration of these tax advantages in 2010 will not be disastrous, as Wall Street has learned investment decisions involve much more than tax considerations.

"Although the Democrats took control of the House and Senate, how much power has really shifted since they do not have the votes to overturn a presidential veto (67) or stop a Republican filibuster (60)? The Republicans still control the White House, the Supreme Court, and the Federal Reserve System. Some analysts think power will shift to the center. We think it will simply stop shifting to the right.

"Perhaps the greatest threat to our economic future is expiration of the president’s “Fast Track Authority” to negotiate international trade policy, particularly the Doha Round, which is currently stalled. Globalization is too powerful to be ignored, and controlling it is critical. Democrats may stop renewal of the president’s authority next year, which is not healthy in the long run. We will be watching this carefully.

"Investors accept many risks routinely. One risk will become more important as a result of the Democratic takeover, i.e., “Headline Risk.” We can expect to see the energy sector under even greater attack and threats of an excess-profits tax. It will not happen. Attacks on Wal-Mart will continue but produce little, other than depressing its stock price. Nonetheless, bad press produces lower market values. As a result of the shift in power, Bay Capital Advisors has reduced its clients’ holdings in pharmaceutical and healthcare companies, but not in defense companies."

In your continuing coverage of this story, feel free to call Jim for comment, analysis or background at (757) 641-3378. His views on the economy and investments can be found at http://www.baycapitaladvice.com/media-coverage.asp.

About Jim Flinchum
Flinchum is the managing principal of the financial planning and investment company Bay Capital Advisors in Virginia Beach. His deep understanding of the financial world, national and global economics, and investing make him an outstanding Expert Resource for your articles. For more than 35 years he worked in senior-level positions for some of America's premier banking institutions, taught economics for the American Institute of Banking and the University of Texas, and served as a gubernatorial appointee to the State Depository Board.

Jim Flinchum contact
jim@baycapitaladvice.com, (757) 641-3378