If this headline from the AP newswire is to be believed, stocks went down today because Obama was elected president. As in, investors were totally caught off guard by this completely unforeseeable outcome. I guess such prognostic ineptitude would be consistent with investor behavior of late, but it would be completely inconsistent with the prediction markets at Intrade for the last 30 days.
Paragraph two blandly observes: "The market was expected to give back some gains after a six-day runup that lifted the Standard & Poor's 500 index more than 18 percent. But investors lost some of their recent confidence about the economy and began dumping stocks again; light volume helped exaggerate the price swings."
Light volume, of course, suggests most people in the market are holding onto shares, rather than dumping them in a panic because of Obama's victory. A six-day, double-digit rise in the S&P, in a market that many fear may not have reached bottom yet, seems the more likely trigger for profit-taking by short-term stockflippers. But they can run that headline any time; the causal link to Obama's win won't work in a day or two, so they're using it while they can.
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Do you really think the media is out to get Obama already? The honeymoon's not over until the State of the Union address :)
The media needs catchy headlines, and they'll use any handy passerby. Today it was Obama. Tommorrow, who knows.
Obama's victory was pretty clear two weeks ago. The market has already has factored in the pros/cons of an Obama administration by now. This is probably just more of our recent volatility, no more, no less.
Obviously, the long term impact of an Obama administration on the stock market will be best assessed, you guessed it, retrospectively.
There's no intention at all behind the headline; it's just an example of trying to make ordinary fluctuations newsworthy. The counterfactual test holds: Had McCain won, even if that news caused stocks to surge further, that too would have triggered a sell-off probably the same day.
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