Markets on edge for election day and beyond

Markets could be volatile no matter who wins Tuesday's presidential election. Here's what to expect if Obama wins, if Romney wins or -- worst-case scenario -- if we don't know right away.

By Charley Blaine Nov 2, 2012 2:05PM
Markets will likely be on edge leading up to Tuesday's election -- and volatile the day after and for the remainder of next week. Emotions about the election are high and often bitter. The trench warfare of the campaign is intense.

The polls -- and the analyses of the polls -- give the nod for a very narrow win to President Barack Obama, especially after a relatively decent jobs report on Friday. Mitt Romney's camp says he's going to be the clear winner.
We'll see. There are some hints from history on what may happen.

Obama wins
If Obama wins relatively clearly -- that is, the results aren't disputed and end up in the courts -- the stock market may well tumble on Wednesday. It did after he was elected in 2008: The Dow Jones industrials ($INDU) were off 7.1% by the end of the week, with the Standard & Poor's 500 Index ($INX) off 7.4% and the Nasdaq Composite Index ($COMPX) down 7.5%.

Yes, those are real numbers, but they may have had less to do with the president-elect than with the ongoing financial crash of 2008.

Obama and Wall Street have an edgy relationship, even though one of the great stock market rallies in history began in March 2009 after he took office. Many on Wall Street have spent millions of dollars trying to push Obama out.

There is a chance for a different outcome. If Obama wins, it means Ben Bernanke will probably stay on as chairman of the Federal Reserve Board until his term expires in 2014. And the Fed's accommodative monetary policy -- the promise of low interest rates into 2015 -- will continue.

Moreover, the odds for a solution to the fiscal cliff -- the combination of tax increases and spending cuts -- will increase. To do nothing won't help Republicans. That will be bullish for stocks.

The first scenario is more likely, but the second is worth thinking about.

Romney wins
If Romney wins the election clearly, the stock market may jump. He himself predicted it would when he made his now-famous comment about 47% of the population seeing themselves as victims.

Our conjecture here is based on the market's reaction to George W. Bush's re-election in 2004. The major indexes jumped about 3% that week.

That return was about all the Dow did for that year; the S&P 500 and Nasdaq ended the year up more than 8%.

Wall Street will be delighted in a Romney win because, the theory goes, regulation will be rolled back and Obamacare will be repealed. And there is the prospect that Romney's vows to fix the tax code will mean lower taxes for the wealthy.

It is possible -- if unlikely -- that a Romney win won't cheer the Street. One issue is Bernanke, who would be pressured by many in Congress to quit and go back to Princeton. Two issues will go through investors' minds: Who will replace Bernanke and when would a new Fed leadership then start raising interest rates? Rising rates are death to stocks.

There's a third issue. Romney is an experienced and successful business executive. But what is not clear is whether he has the political subtlety to convince a tea party-dominated Republican majority in the House of Representatives (and maybe the Senate as well) to trim government spending carefully without tipping the economy into recession. He insists he can lead, but Congress is not a business. There are lots and lots of agendas and scores to be settled publicly and privately.

The tea party scares Wall Street. Look at the reaction in the debt-extension crisis in the summer and fall of 2011. The Dow fell as much as 6.9% before stabilizing in early October; the S&P 500 and Nasdaq were off about 8%.

There is no winner
This assumes that neither Obama nor Romney can come up with 270 electoral votes needed to win. Or results are delayed by the effects of Superstorm Sandy in the Northeast or Ohio.

No one wants this except political talk-show hosts. Least of all investors. When the 2000 Bush-Gore election ended without a clear winner, the Dow fell 3.2% that week, with the S&P 500 off 4.6% and the Nasdaq off 11.3%.

Admittedly, the dot-com bust had broken the 1990s bull market, and the Sept. 11, 2001, terror attacks were ahead.

But a soft economy and a weak stock market do not do well in extreme political uncertainty. Between Election Day 2000 and the market bottom in October 2002, the Dow fell 33%.
177Comments
Nov 5, 2012 10:57AM
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By "relatively decent" jobs report you must mean that it wasn't quite as horrible as the previous months.  Still embarassingly low number for a "recovery" that has to be compared to a recession to look "good".

The reason the market plunged on Friday was because it was yet another in along line of miserable jobs reports.  And the reason jobs aren't being created, according to the majority of small buisnesses, is gross over-regulation by the most anti-buisness administration in American history.

And Dodd-Frank hassn't created millions of jobs in the Financial sector?  What a shock!  Could it possibly be because Dodd-Frank has made it extremely difficult for people to borrow money?  Only the rich, who don't need to borrow money, can take advantage of the extremely low interest rates.  Dodd-Frank is just one more way Obama's policies have attacked the middle class.

Nov 5, 2012 10:53AM
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just read an article saying apple has cash of 80 billion off shore and hasn't paid corporate tax on the money and then you have the legions of apple liberals criticizing romney from their iphones and ipads - is the irony lost on them -  absolutely 
Nov 5, 2012 10:46AM
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JUST SAW AN AD ON THE TV WITH KARL ROVES NEW FRIEND  SENILE CLINT EASTWOOD. I WILL GIVE HIM CREDIT HE HAS A LOT GAUL ,HE GOT VERY RICH FROM THE SAME BLUE COLLAR WORKERS HE IS NOW TRYNG TO SCREWOVER. FROM RAWHIDE WAY BACK WHEN ,THRU THE DIRTY HARRYS  TO NOW HE HAS BECOME VERY FORGETFUL BUT THAT IS THE PATH OF THE 1% . YOUR 82 CLINT BAD MEMORY OR MAYBE YOU LOST YOURS!!!!!!!
Nov 5, 2012 10:35AM
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LOVE READING THESE POSTS FROM ALL THE HEAVY INVESTORS LOL .THESE CLOWNS WOULDNT KNOW THE STOCK MARKET FROM THE SUPER MARKET.
Nov 5, 2012 10:34AM
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Bumpy ride for America after the election!  Like Abi, I'm tired of Buckin Bronco Bama and Mitt Romney.  I don't think we'll be in better shape in four years no matter who wins.  The country is destroyed already.  Maybe China will foreclose and set up a reasonable government and taek control of the legal drug lords and their pimps.  But tomorrow is the day!  VOTE AGAINST ALL INCUMBENTS!!  Wanta have fun with the political calls and cards?  Return the favor!!! after putting in www then put in .ALGOP.org and send them unsolitited emails!!! This is the rupublicans bunch in Birmingham, Alabama!!!  they want people to vote straight republican.  I'm voting straight anti-incumbents!
Nov 5, 2012 10:26AM
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Short-term, the elections can influence the market, no doubt.  In the end, though, it is you and I who make the market work, so long-term I don't think the President has much effect.

Nov 5, 2012 10:20AM
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stock market flexes of 150 points every day is just a roller coaster ride. Day traders are ripping us long term investors off with timing. There should be a 90 day or one quarter hold on the sale. you buy it you own it for a minimum of 90 days. not in and out 2 or 3 times a day on the same stock.
Nov 5, 2012 10:11AM
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Be SURE to read the story about your "supposedly" JOB CREATOR...Bain(Robme) Capital....AND

 

KB Toys....10,000 jobs GONE.....It's a short read, you should not get confused??

Nov 5, 2012 10:03AM
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Yup......The Market HAS BEEN TANKING the LAST 4 YEARS.....

 

I think our glass is "over HALF FULL"....Actually it is "OVERFLOWING."  Thanks, Barack.

Nov 5, 2012 9:54AM
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the market will tank for the next 4 years if Obama wins. His policies and bills hurt business growth and he hasn't expressed any change in direction for the next administration.


Nov 5, 2012 9:27AM
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"CONCORD, N.H. — Obama kicked off his final 48-hour push to the finish line this morning in New Hampshire, telling a chilly but enthusiastic crowd of 14,000 that at this stage in the campaign he’s just “sort of a prop in the campaign.”

Finally, he tells the truth! 

Well, almost. He's been a prop for 4 1/2 years.
Nov 5, 2012 8:42AM
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Housing still needs fixing. More are still walking away. Many middle class people who paid on time have lost hope of ever coming out of the housing mess without debt. Good jobs,  good interest rates on CD's, a lower inflation rate and a sound stock market will build a better America. Too many seniors who have worked hard to build this country cannot afford food or medications after the last four years of inflation.
Nov 5, 2012 8:27AM
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The only bumpy road this country will be on is the fact the republican congress wants their way to make laws and to rule this country no matter who gets in office.

 

What needs to happen,  if Congress doesn't work,   they don't get paid.

 

There needs to be an oversight  chair   making sure congress is on the job doing the people's work with NO POLITICAL AGENDA.

 

LOBBYIST should not have offices within or any other bulding of  the capitol.  THEIR OFFICE SPACE IS PAID FOR BY TAXPAYERS.

 

If congress wants a phillabuster,  they have to be present in chambers where there is  public transparency of viewing whast is going on thru C-Span!

 

When congress is in session, all have to be present when a bill is presented that they are either a part-of or concerned about,  and  not in their private offices just   listening to what is being said.... Seeing on C-span,  the chambers almost empty with just a few congressmen  and  congressional workers present,   gives the public the preception that congressmen ARE NOT ON THE JOB.

 

NONE OF THESE THINGS WOULD HAVE TO HAPPEN IF THEY DID THEIR JOBS AND ACTED LIKE ADULTS,  WHILE AT THE SAME TIME BEING RESPONSIBLE TO THE AMERICASN PEOPLE , AT THE SAME TIME LEAVING OUT POLITICS!

Nov 5, 2012 12:34AM
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Someone )( DID IT ONCE IN YOUR LIFE)... you have looked at maybe a decade at best...????

 

Very small minded and sighted, please take a CHANCE and look at 60-70 years of history...

 

AWAKEN TO A BRAVE NEW WORLD...

Nov 5, 2012 12:24AM
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So stocks are overbought and maybe they will correct and then what ?? Tell me O'Swami.....

Is it locked up in a mayonaise jar ??

 

I saw a f*****n bottom in 2008-2009 early spring, wtf were you doing, your sister ?? 

Nov 4, 2012 9:08PM
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"New Jersey Gov. Chris Christie says President Obama earned his praise for handling of superstorm Sandy, but Republican Mitt Romney still has his vote

JERUSALEM - New Jersey Governor Chris Christie defended his praise for President Barack Obama's support after superstorm Sandy, but said he would stick with his Republican ticket and vote for Mitt Romney in this Tuesday's election."

 

Translation: Thank you for coming to rescue my fat asss but I'm still going to hang on the bandwagon and whine about spending... even though you are spending it to recover my state. This is why you and I go nowhere when Republicans hold key Offices.

Nov 4, 2012 6:14PM
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This is not the time to be in stocks. Stocks are overbought. It has nothing to do with the election. Google for HAVE WE SEEN THE BOTTOM IN STOCK MARKET to understand how technical indicators ring the bells and turn the odds in your favor.
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There a many opinions as to why the market bottomed in October 2002. Do you think the November 4, 2002, election where the voters giving the US Senate back to the Republicans might have had something to do with the results? The economy appears to do better with the Republicans in the House and Senate. They are the people who write the laws. All one has to do is look at what happened to the economy after the Democrats took the House and Senate in November 2006. Or what made President Clinton look good.....his last 6 years were spent with a Republican House and Senate. 
Nov 4, 2012 2:21PM
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"Crazy 8's is a racist...plain and simple.
It appears the stock market will tank if Obama is elected...not because Obama is re-elected, but because paranoid idiots will pull their money out and make the market drop.  Self fulfilling prophecy if I've ever heard one.  Oh...that's right...the tea party is the American taliban pseudo-theocracy."

Was there ever a time when this wasn't true? There isn't ONE Romney supporter who can tell the rest of us what this man's ACTUAL positions are. He has changed them all at least once. He has no history that merits warrants respect. He was a poor governor, a sleazy businessman. He used offshore bank accounts and evaded taxes. He donated and wrote off charity givings that went to a  false front that bought mudslinging airtime on his behalf. He even has people inside Microsoft rigging these Comments blogs.
Nov 4, 2012 10:41AM
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Romney will be the next President of the United States....(Thank God).  Pack your bags Obummer!
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[BRIEFING.COM] The stock market punctuated July with a broad-based retreat that sent the S&P 500 lower by 2.0% with all ten sectors ending in the red. The benchmark index posted a monthly decline of 1.5%, while the Russell 2000 (-2.3%) underperformed to end the month lower by 6.1%.

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