I was curious to see how the markets reacted to the Obama moment on Tuesday. Regret that this post comes so late in the day. I guess I was too overwhelmed by the event itself!
Am asking a rather naive question. When do investors cease to become citizens/voters. What does it mean when they say markets had priced in the results of the elections?
That a new President heralds a transition and brings in optimism is too passe for the markets. The policies of the newcomer may not have a favourable effect on certains sectors of the economy, but the direction in which the governance and the economy would move, I thought was sufficient to spread optimism. Clearly not. There is some dispute if the markets do better under a democrat. Forbes had a story 'Has Obama’s Rise Caused the Markets to Fall?' mapping each time the market fell - discussing causality and correlation.
That the week brought in dark data on labour, unemployment and manufacturing did not help the markets despite witnessing one of the most sublime moments in recent history. Jobless rate jumped to a 14 year high of 6.5% in October, number of people receiving unemployment benefits rose to a 25 year high. Instead of adding 100,000 jobs per month, the economy shed 240,000 jobs monthly. Manufacturing growth fell to a 26 year low to 38.9 on the index of national factory activity, even as productivity rose 1.1%. Not surprising then that amid such gloomy data, investors could not help but be pessimistic.
Tailpiece: Here is an interesting development in Singapore, when investors became more politically awakened in the aftermath of the financial crisis.