Investors not excited for O’Bama presidency

By Pete Southern in LiveWire Economics Blog | November 7, 2008 10:00 |

There has perhaps never been a more profound and emotional response to a presidential election in US history. It was estimated that over 200,000 people showed up at Chicago’s Grant Park for President O’Bama’s acceptance speech. New voter turnout hit a new record.

It was not just Americans who seemed enthused at the election of the country’s first black president. Media studies showed that worldwide audiences were pulling for O’Bama by a roughly 2-to-1 margin. Much of the global interest in the US election is due to the intense scrutiny of President Bush in the midst of the global financial crisis. About 60 per cent of voters said the economy was tops on their list of issues. It is not surprising that the party in power suffered through many national elections in such a time of concern.

Despite the hopeful population, Wall Street does not seem to be as optimistic with the empowerment of a Democratic president. Traditionally, the Democratic Party has been considered the less capitalism-friendly of the major parties. This is concerning for investors hoping for great gains on their investments. In an already struggling economy and with equities already significantly down in recent months, the prospect of potentially restrictive big business policies is frightening for Wall Street.

Much of the debates leading up to the election centered on the differing economic philosophies of the two candidates. President-elect O’Bama talked about his plans to keep taxes low for people making under $250,000 while collecting greater tax revenues from companies. The now infamous “Joe the Plumber” saga that centered on a small business owner represented the conflict in tax policies between the working class and small businesses.

Ironically, investors produced an Election Day rally of over 300 points for the Dow on Tuesday. It is unclear whether this was the result of renewed hope that John McCain might win or just general Election Day giddiness taking over the markets. There is little question that the nearly 1,000 point 2-day drop since the election is concern from investors about the potential policies to be set forth by the O’Bama Administration. The S&P had its worst 2-day drop ever giving up roughly 10 per cent of its value between Wednesday and Thursday.

Data has not helped matters this week. Retail earnings have been consistently weak across the board. In a sign that struggling companies might be far from out of the woods, manufacturing order data earlier in the week showed there is not much movement in business expansion.

President Bush’s Administration has been working diligently to try to maximize the benefits of the in-progress $700 billion bailout plan. Officials have been publicly calling for creditors to expand their lending programs quickly to help improve cash flow in the market place. President Bush and wife Laura are set to meet with O’Bama and his wife Michelle at the White House to discuss the transition leading to the January 20th inauguration.

Market Recap

Investors have not reacted well to the first two days of the O’Bama president-elect waiting period. After a hopeful Election Day rally, the Dow has dropped just short of 1,000 points in the two days following the election. The S&P has given back 10 per cent of its value, the largest 2-day drop ever. Oil fell today on the back of a struggling economy. Blockbuster reported a smaller earnings loss of $.11 per share for its third quarter. This was about the only retail earnings “success” on the day.

Neil Kokemuller
Thursday, November 6, 2008
9:24 PM EST

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.



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