Peter Viles gives the view from Wall Street

Peter Viles

CNNfn Correspondent Peter Viles analyzes how the election deadlock may be affecting the stock market.

Q: The Nasdaq composite index fell below its lowest close of the year early Monday. How big a factor is the uncertainty over the presidential election?

VILES: It's definitely a negative factor. Investors are looking for some certainty in the political landscape. As long as they don't know who will be the next president a lot of investors choose to stand on the sidelines. It's generally bad for the market when you take some people out of it. But even if we didn't have this crisis over the presidential election there's a bunch of reasons the markets that could be causing the markets to slow down. Companies are still making money but the growth rate is slowing down. And the growth rate is what people look at when they pay for a stock. There's also continued weakness in the technology sector. Corporate profit growth is slowing dramatically even though it's still at historically high levels. It's projected to be in the 11 or 12 percent range in the fourth quarter. But we had growth closer to 18 percent in the third quarter. The problem is that when investors drove up the price of stocks in the past year or so they were expecting more growth than that.

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Q: What about the longer-term implications of the divided Congress?

VILES: The conventional wisdom on Wall Street is that political gridlock is good. There had been a lot of talk that the split in Congress is probably a good thing for the markets because there won't be any big changes in the market. But that feeling has started to come a little bit under attack. There is more and more discussion that if the economy has some kind of slowdown, Washington will not be able to react fast enough. That's a concern in the market that you didn't really have two months ago.

Q: How does the end of the year generally affect the stock market?

VILES: There tends to be a rally toward the end of the year. Last year we had a huge, historic rally near the end of the year. The Nasdaq went through 3,000, 4,000 and then 5,000 starting about a year ago. I think most investors would now say that that was a bubble and that the bubble has burst.