Why the Stock Market is Down

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.


Final Electoral Vote Count

Here’s my prediction.

Obama: 332
Romney: 206

This map gives virtually every very swing state to Obama, with the exception of North Carolina. This outcome is very possible since Obama has led in most polls in each of these states.

I’ve also taken into account momentum, which has been in Obama’s favor recently. His polling number s have improved since Romney’s momentum seemed to peak around the time I posted Congratulations President Romney.  Note that in that map, Romney still had to win 2 of 4 states in which he now trails in the polls.  Also,  I gave him Virginia and Florida which I now give to Obama.

 Congratulations President Obama shows a scenario with Obama winning without Florida or Virginia.  In this case he needs Ohio (or Colorado and Nevada).  Ohio remains critical.

In short, Romney needs to win several states where he is trailing.  Obama has many paths to victory where he doesn’t need a particular state, yet he leads polling in most of the states he doesn’t need.

Finally, further evidence of Obama’s momentum is found in the online gambling sites, which last week had Obama as a 3 to 1 favorite, and now show him ahead as much as 45 to 1.

So it looks like Obama gets to keep his job, which should boost employment figures at least by 1.

Congratulations President Romney

If the election were held today, It’s a toss-up. But Romney wins the popular vote. One state would decide the election, if held today. Ohio.


With the momentum from the Popular vote, I suspect Romney would carry Ohio.

However these polls were all taken before the last debate, which was also considered a toss-up.  It remains to be seen if  Obama has stopped the momentum Romney has built from the first debate.  But since my earlier post congratulated President Obama, I decided now was a good time to give Romney credit for quite a comeback.

Obama still has a distinct advantage.  If he sweeps the other 3 tan states in this map, Colorado, Iowa and New Hampshire, he doesn’t need Ohio.  Romney does need Ohio.   Bookies still favor Obama, and pay 2 to 1 for a Romney victory.  But it’s gonna be a close one.