Republican Midterm Election Victories Could Crush Stocks and Bonds Before Sending Them Higher

Markets have rallied on the belief that resounding Republican victories in yesterday's (Tuesday's) midterm elections will reset Washington agendas and lead to more business-friendly policies. However, market participants may be surprised to find that the successful pursuit of three major Republican principles could initially sink stocks and bonds before creating a base from which they might rally later in 2011. Indeed, following the adage "buy the rumor, sell the news" might be the best strategy for investors right now.