Yesterday the day after President Obama was re-elected stock marked declined. Immediately news articles appeared titled “Wall Street Dips on Obama Win”. This kind of thing happens every morning. The market moves in one direction, and articles assign a reason. IT would be just as easy to write “NASDAQ falls from #whyRelationshipsEnd Twitter Tag Trending.” But does anyone check for causation? As any student of Math or Science knows. “Correlation does not imply causation”
NASDAQ, SP and The Dow Jones all down about 5% over the past month.
So why did the market go down yesterday? The answer is, the market is a complex system that reacts to an almost infinite stream of data analyzed by hundred of millions of investors. Several notable things have pushed the market down recently, and particularly caused it to dip yesterday. It’s hard to tell what effect the re-election had, but it certainly didn’t move the market up.
1) Missed Earnings and Expectations
Several companies have had disappointing earnings this quarter IBM, Apple APPL, Amazon AMZN , Toyota TM. These misses are being absorbed by the market. When major companies like these move down, they pull down their respective indexes, and the over all market drops.
2) EU Debt Crisis
The day after the election, the EU issued a report raising concerns that IMF austerity budgets for struggling countries like Spain and Greece are deepening the recession in Europe. Many analysts felt this prompted a sell off in the markets .
3) Sandy’s financial Impact
More than a week after the hurricane hit the New York area, analysts were still assessing Sandy’s impact, and the market is still dropping. Wall Street and the people and companies in the financial industry are still struggling from the storm. Still not everyone can get to work, and even those who can are struggling to help friends and family with basic necessities. Those who have started to return to normalcy are still helping those who haven’t. Hard working families on Long Island are tripled up in house with power.
So we are still in a Bear market that has been going on for several months now. As for the impact of the re-election, time will tell.