Significant legislation is pure redistribution of money, property rights, and/or regulation. Ken has used the research available and concluded that landmark legislations are passed at times when the presidents have stronger control over Senate and Congress. When the political system is gridlocked, no landmark legislation will be passed. This will cause stock markets to rise as political risk aversion declines.
As at 18 Nov 2010, the author has noted that America, Germany, Australia, Italy, Belgium and Netherlands have their political systems gridlocked. This situation is great for the stock market. And since US and non-US stocks are positively correlated and America makes up a large share of the world. The same pattern appears in global stocks.
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