Did the market rally prior to election day because polls showed McCain gaining on Obama? Many laughed at the suggestion.
Until the day after Election Day.
From that point on, the AP reports the market (as measured by both the Dow Jones and the S&P 500) fell a whopping 32%. In the first seven weeks since inauguration day alone, according to a Bloomberg.com story, the markets dropped 21%, leading the mass media to coin the phrase “the Obama Bear Market” (a column in the Washington Post of all places leading the charge).
How did Obama earn the honor of becoming the only President to ever have the market crash 20% this fast?
Simple. Take a look at what BusinessWeek said.
To understand, you must accept the apolitical amoral nature of the market. The market bleeds neither red nor blue, but green. To some, this represents an alien concept (and we’re not talking Vulcan, here). The market merely stands for the common wisdom of umpteen individual traders, securities analysts and portfolio managers. They don’t get paid for promoting a particular party or philosophy. Those big bonuses come only when they perform – either by making money when the market does well or losing less when the market tanks.
When America elected Obama, the pre-election McCain bounce evaporated. The markets feared a return to the unproductive villain-ization of business Democrats so fondly embrace. But, then, Obama, in his early announcements, selected a group of seemingly pragmatic Clintonites as the core of his economic team. The market enjoyed the latter half of the Clinton administration and these appointments boosted spirits despite ongoing degradation of economic news.
Oh, this is important. The market normally doesn’t react to today’s economic news, but usually anticipates the economic cycle. That’s why they call it a “leading indicator.”
But as we strolled through September, Obama’s appointments impressed less, and Wall Street began to wonder who would run the show come January 20th – a pragmatic President or a Radical Congress. We found out in a hurry. Obama rolled over for Pelosi on the first stimulus, decided to publicly denounce Reaganomics and began a “tune-a-day” of retro-liberal programming. The market fell, first in disbelief, then in genuine worry the Audacity of Depression would soon overcome our economy.
Then, what started as a whimper, became a Santellian cry, then a Cramer-esque rant and finally, early last week, a Buffett-like blow. Even his own party feels Obama’s biting off too much (see this NY Daily News piece or this Detroit Free Press column or this article from McClatchy newspapers…)
And now the administration has decided it’s time to talk nice about the economy?
Obama’s First Fifty Days: Walt Street Shrugged, Washington Blinked.