In what will likely be remembered as an epic decision to America’s unions, the Supreme Court ruled 5-4 on Monday – in a decision split along ideological lines – that businesses can force employees into individual arbitration to resolve disputes, virtually eliminating the threat of a class-action lawsuit.
The Washington Post described the ruling as “an important outcome for business interests.” The decision could make life much harder for unions fighting for better conditions and wages.
Justice Ruth Bader Ginsburg called the decision “egregiously wrong”. She argued that individual complaints can be very small in dollar terms, or “scarcely of a size warranting the expense of seeking redress alone.” The justice read a summary of her dissent aloud in the court.
In a comment that broke with the administration’s official view, the National Labor Relations Board argued that requiring employees to waive their right to collective action conflicted with national labor laws. Bodies representing business were united in support of the ruling.
Meanwhile, lower courts had been split over the issue. Two rulings had been issued – two in which appeals courts ruled that such agreements can’t be enforced and a third in which the appeals court said they are valid.
According to the New York Times, the Court had ruled back in 2011 during the AT&T Mobility V. Concepcion case that companies could forbid class actions in contracts with consumers. These contracts typically require two things: That disputes be resolved and claims brought through arbitration.
The justices were asked to determine whether these same conditions apply to employees.
The following chart depicts this election cycle, i.e., the average four-year pattern of the Dow Jones Industrial Average over more than a century. On the left hand side you see the pattern during the election year, followed by the first post-election year. Thereafter comes the mid-term pattern – which is highlighted by a red circle – and lastly the pre-election year pattern.
In the past 116 years the DJIA delivered the strongest performance during election and pre-election years on average. Post-election years typically also managed to generate gains. The mid-terms were typically the weakest time period.
Given that prices on average barely rise in mid-term years, there is obviously a heightened probability of declines. Thus there is a threat of a sizable fall in stock prices in 2018.