Stop the presses! Congress actually does something.

Rather than the capital city of the most powerful democracy on earth, Washington often resembles a food fight from the movie Animal House. All too often, the art of legislating has been supplanted by personal insults, outright lies, paranoid conspiracy theories, character assassination, ideological extremism, and just plain lunacy.

But in recent weeks, two major pieces of legislation have made it through the congressional gauntlet, both pushed by the White House and of benefit to investors:

• The CHIPS and Science Act, which provides more than $52 billion for U.S.-based companies producing computer chips.
• The Inflation Reduction Act, a sweeping, $700 billion package that addresses climate change, health care, green energy initiatives, and taxes.

The former passed with bipartisan support in the House and Senate; the latter passed along party lines in the Senate. Both are now assured of passage and the signature of President Biden.

As I’ve previously written, these pieces of legislation will have major and positive ramifications for investors.

Read This Story: The EV Industry Gets a Big Jolt

Partisanship certainly isn’t dead, not by a long shot. And the fiercest ideologues have been taking their potshots at the bills on the TV gabfests. However, for the most part, the opposition has been token and ineffectual. Neither bill was derailed, especially after the centrist Democratic holdouts. Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), finally got on board for both.

The tax elements of the Inflation Reduction Act include a 5% minimum corporate tax, as well as a new tax on company stock repurchases. Most analysts project that these tax provisions will exert minimum impact on corporate profit growth, which is forecast to continue at a healthy clip.

For the second quarter, the blended earnings growth rate for the S&P 500 is 6.7%. With nearly 90% of S&P 500 companies reporting actual results (as of August 9), 75% of S&P 500 companies have reported a positive earnings per share (EPS) surprise and 70% have reported a positive revenue surprise, according to FactSet (see chart).

Optimism is returning to Wall Street. The bear market probably bottomed in June. Overall, there are 10,648 ratings on stocks in the S&P 500. Among these 10,648 ratings, 56.1% are Buy ratings, 38.3% are Hold ratings, and 5.6% are Sell ratings. The information technology (64%) and energy (63%) sectors boast the highest percentages of Buy ratings.

My colleague Dr. Joe Duarte, an expert on high-tech investing, has written incisively about the huge stakes of the CHIPS Act, and how its provisions are manna for the beaten-down tech sector.

Read This Story: Signs of a New Bull Market in Tech

Whether you’re a Democrat or Republican, and whether you love or hate Joe Biden, a sense of legislative accomplishment has returned to Congress. Wall Street isn’t ideological; it’s pragmatic. It cares about money. The dispassionate traders in Lower Manhattan seem relieved that the politicos along the Potomac are turning their attention to industrial policy.

All eyes on the CPI…

Amid this backdrop, U.S. stocks tread water Monday in a narrow range, after last week’s gains that extended the S&P 500’s winning streak to three consecutive weeks. Over the past month, the index has risen more than 8%. Small caps have been outperforming, suggesting bullishness about the economy has returned to Wall Street.

In pre-market futures trading Tuesday, the major U.S. equity benchmarks remained in a holding pattern, ahead of the July consumer price index (CPI) report on Wednesday. The rate of headline inflation is widely projected to moderate below the 9% level witnessed in June, largely because of the dramatic drop this summer in commodity prices.

Progress in Washington is certainly welcomed, but the big story remains inflation. The rate of price increases will determine whether this rally has legs.

Editor’s Note: In this volatile and risky market, where can you still find solid growth opportunities? We can sum it up with a single word: takeovers. You might have heard them referred to as buyouts, mergers, or acquisitions. But no matter what you call them, when a takeover is triggered, the profits that spill out have life-changing potential.

In this era of war, inflation and pandemic, corporate consolidation is the name of the game. Even the whisper of a “mega-merger” can hand investors enormous returns. My colleague Nathan Slaughter, chief investment strategist of Takeover Trader, just pinpointed a potential takeover deal that could dwarf them all.

Want to get in on Nathan’s next big trade? Click here for details.

John Persinos is the editorial director of Investing Daily.

Subscribe to John’s video channel: