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  • The Obama Bounce

    Posted by Jonathan on November 6th, 2008 (All posts by )

    The stock market is looking weak. Purely a coincidence, I am sure.

     

    16 Responses to “The Obama Bounce”

    1. Dan from Madison Says:

      All I can say is “ouch”. I am glad I have a long time to recover, but I really do feel bad for those who need their retirement moneys soon. If nothing else some may have large write offs for the year if they cash out.

    2. Lexington Green Says:

      Since Obama was expected to win, shouldn’t this all have been priced in earlier?

      How much of the big downturn was precisely that?

    3. Jonathan Says:

      -For most investors, capital losses can only be offset by capital gains. You can’t write them off against ordinary income on your taxes beyond $3k/year. So if you take losses now you will probably have to roll them forward until you have realized gains, which might be a while.

      -I don’t know the extent to which an Obama victory was priced into the market, or how much the recent market weakness reflects his election. These aren’t easily testable questions, and Obama isn’t the only influence on market behavior. However, Obama’s election wasn’t certain until he was elected, and I think it’s possible that the market weakness of the past couple of days is the result of the market’s discounting the last ten percent of probability that he would be elected (i.e., from ~90% to certainty). Also, broadly, the market has been going down late Spring, when Obama was nominated. Correlation doesn’t prove causation, but my guess is that in this case there is a relationship.

    4. Lexington Green Says:

      First ideological socialist we have had in there maybe ever.

      Bound to have some negative impace.

      If my friends who think he is a plain-vanilla centrist technocrat are right, I hope we will have a rally in the market to celebrate this happy fact.

      At this point all we can do is wait and watch.

    5. Robert Schwartz Says:

      I just got he October 31 statement. This is an ugly situation.

    6. Dan from Madison Says:

      It is still good to have bullets in the gun, so to say, for the future. Of which I will probably have many after the carnage is over.

    7. Brett Says:

      If, as seems likely, it was the election of Obama that caused this downturn, then it is fully within Obama’s power to produce a recovery. All he has to do is convincingly reassure us that he truly is a “pragmatic centrist”. A clear statement, some policy releases, and that is about all it would take. The market would recover quickly.

      If he doesn’t do that we can fairly safely conclude that he is indeed a dogmatic socialst – and the market will continue to slide…

    8. virgil xenophon Says:

      I am always amazed at those who think proposed changes in tax law
      doesn’t affect behavior and expectations. True enough, markets frequently don’t move in lock-step with the news, but has anyone noticed a sudden surge in gun and ammunition sales? Just a fluke, a coincidence you say–that one trend is up and the other points down? If your life was on the line yea or nay, how would YOU answer that question, sports-fans?

    9. Methinks Says:

      There’s too much noise in the market right now to attribute this to Obama.

      The market is forward looking and Obama was widely expected to win. His win was priced in. However, there’s so much data coming from all over the world, that it’s difficult to isolate the Obama effect.

    10. Methinks Says:

      Virgil,

      The near promise of higher capital gains tax rates next year certainly will have an effect. The problem is that the market has taken such a beating this year, it’s difficult to find any gains to take.

      What I “love” is the headlines on election day that claimed the rally was because the election led to “change”. Of course, Asia and Europe were up those days too (which is why our market rallied) and that was attributed to the upcoming crowning of the Obamessiah. Um….no. The Asian markets sold off sharply for a while when it became clear that Obama won because they understood that the consumer of last resort would produce and therefore be able to consume less with a socialist president and socialist congress.

      The next two days’ headlines, when the market tanked two days in a row, was that the market turned its attention from the fabulous news of electing Obama to the weak economy. Yeah, because in the middle of the trading day, all of us traders totally forgot that there’s anything else going on in the world except the good news that we’re electing a president and congress that will fast track us to Euro-socialism. Obviously, it’s time to buy stocks then because buying high and selling low is a winning strategy! Oh, the media….

    11. Jonathan Says:

      Methinks,

      Possibilities are: 1) market went down because of Obama, 2) Obama’s election had little or no effect on market and 3) market would have gone down more if McCain had won.

      Maybe the sell off of the past two days was all noise. I would have felt better if the market had rallied instead.

    12. Methinks Says:

      Jonathan,

      Markets don’t react to that slowly to news. I was watching the overnight trading session in SPUs (S&P 500 futures) as it became clear Obama won. They fluctuated between down 65 bps and up 45 bps all night until about 3 am when I finally went to sleep. Contrast that with 2004. Consider that in 2004, when the false exit poll news that Kerry was winning key states came out, the market immediately sold off sharply. To traders, news that is one minute old is already ancient. The market response is so quick that news shows up in SPU trading about 15-20 minutes before either television news or the internet announce it. Thus, I’m inclined to say that the sell off on the two days following the election had more to do with overly exuberant responses to various news items over the preceding week than to Obama’s victory.

      That doesn’t mean that some part of the market decline before the election was not attributable to an expectation of an Obama presidency and a democrat congress. It just means that those two particular sell offs are most probably not.

    13. Jim,MtnViewCA,USA Says:

      yeah, it’s been 2 down days, and up a bit today.
      but the market has been going down for quite some time.
      Obama and the political balance is part of it, I think. I am one person who got mostly out when the slide started simply because it was apparent to me that the people I blame (Fannie/Freddie,NINJA loans,Dem politicoes) would soon be tasked with “fixing” the situation.

    14. virgil xenophon Says:

      When time magazine features a bear
      on it’s cover with a huge article about “the end of profits” you’ll know the time is to buy big time!

    15. sol vason Says:

      The market’s falling because of the war which Obama will start when he realizes negotiation doesn’t bring peace and so he decides to get tough but Putin disses him so Obama gets tougher and boom! War is bad for business and other living things.

    16. Ralf Goergens Says:

      Well, just this week the IMF predicted a global recession for 2009 and the NBER announced that the evidence for an US recession is now conclusive. That might have something to do with it.