the LYNCH report

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Obama Elected; Stocks Tank…

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The Dow Jones Industrial Average closed at 9,625 on Tuesday, November 4, 2008, the day Americans headed to the polls to select their next President, capping a six day rally that had traders thinking the slow path to recovery (or at least relative stability) had begun.


By late Tuesday, it was obvious Senator Barack Obama had won the US Presidential election. Additionally, Democrats took several House and Senate seats, making for a strong (but not quite fillibuster-proof) majority.

The Dow Jones Industrial Average has reacted swiftly and strongly: as of this writing, the DJIA is down to 8,766. That’s a decline of nearly 9% since Mr Obama won the election, and reverses all the gains made during the previous six day rally. That represents over a trillion dollars in capital which has left the market since Mr Obama’s election.

President-elect Obama’s victory is certainly troubling for an economy already on the ropes: he came out in favor of increased protectionism, easier labor union organizing, tax increases on the most productive tax payers, big spending plans on health care, a special tax for successful oil producers and more and bigger government at a time when there isn’t much money to go around and the government has already put taxpayers in the hole for an additional $7,546 each by way of the “bailout” of the financial sector. Additionally, capital is more likely to sit on the sidelines in light of Mr Obama’s proposed 33% increase in the Capital Gains tax (he’s proposed ultimately raising the rate by 87%).

What’s more, Obama and his fellow Democrats will meet very little resistance in imposing their agenda: with the House, the Senate and the Presidency all in Democratic hands (and by wide margins), there’s very little opponents can do to stop wrong-headed policies.

For all the talk of an historic election, recovery for the US economy just got set back considerably: we expect less than 1% growth through 2011, and a contracting economy through all of 2009.


Written by westcoastsuccess

November 6, 2008 at 11:08 am

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