The equities markets are predictors of what will be in our economy if you know how to read them. The day after the Obama victory the New York Stock Exchange dove 489 points or 5.05% the greatest drop after a Presidential election in history. The decline is continuing by hundreds of points as we write.
The 1928 election of Herbert Hoover brought a 1.2% rise while the first election of FDR caused a 2.67% decline the day after election. President Clinton”s first election brought a 0.67% decline while his second election caused a 1.46% rise. From these we can say the market is not a very good predictor, as in Hoover, is more a reflector, as in FDR as 1932 was the depth of the Great Depression and it is prejudiced against rustics or bastards as Mr. Clinton was both. Apparently Ivy League credentials do not cover barefoot beginnings.
The people that work on Wall Street are overwhelmingly Democrat as they largely come from ethnic and religious groups that vote Democrat as a matter of tradition. However, they are politically astute and usually respond to a conflicted outcome positively. If one party takes Congress and the other the White House the stock market reacts positively knowing the elected class will spend more time brawling than coming up with new taxes.
Where President-elect Obama has expressed raising capital gains, and “rich people”s” taxes while promising a tax cut for 95% when 40% do not pay any and a trillion dollars of new spending, we can well expect he is using the same “Whopper” play book as Bill Clinton who announced the largest tax increase in history while crews were disassembling inauguration bleachers claiming to have analyzed all of the 14,000 page last Bush I budget. So, get ready to duck your money and run.
Adrian Vance
Lakeport
