Did the 2008 Election Deflate the Stock Market?

[New York. November 23, 2008.] At the start of this past Friday’s trading day (Friday the 21st), there had been 12 trading days since the 2008 Election. During that time, the Dow Jone Industrial Average (DJIA) had dropped to its 5-year low. On November 4, 2008 (Election Day), the DJIA closed at 9,625.28. On Thursday November 20, 2008, it closed at 7,552.29 (down 21.5% in 12 sessions) and was settling near the 7500 level on Friday the 21st before the last minute 500+ point run to end the week.

In short, in the 12 sessions that followed the Obama-Biden victory, the DJIA has sounded as follows — Down 500, Down 400, Up 250, Down 75, Down 200, Down 400, Up 550, Down 350, Down 200, Up 150, Down 450 and Down 450. This was indeed an ugly stretch and it is far too easy to blame this run on the results of the election. However, even a Republic should admit it is too early to do so.

Although it feels like ages ago, when the DJIA left the 5-digit world in early October 2008 and dropped to about 8,000 in late October, there was press blaming all kinds of stimulus (or lack of stimulus) for that move. However, leading up to the 2008 Election, the DJIA fought back to pull within less than 400 points of 10k. Now, unfortunately, we are back in the low 8,000’s (following a few days under 8,000). Do we have enough to get back over 9,500? 10,000? 14,000?

Pop

On the other side of the world and during a similar period, it should be noted that since the start of the NBA season, the San Antonio Spurs have played 12 games. In those games, the Spurs has six wins and six loses — an ugly stretch for an organization that is accustomed to winning at a 70% rate in the Popovich era. What do the Spurs have to do with the market? Very little. However, there are two paths that this market can take and it is not all that different from the Spurs. After a odd summer, in which Manu Ginobili was injured and had surgery, the Spurs prepared for a start to the season without him. They started the year with no traction and then lost Tony Parker to an injury. Now, Tim Duncan is the only one of the big-3 left and needs to step up and keep this team afloat while Popovich waits for the injuries to heal. Fans in San Antonio just hope all the injuries heal as planned (or quicker than planned) and Tim Duncan can keep his squad above .500 (a.k.a. 8,000) so Manu and Tony can return and carry them into the playoffs (a.k.a. 10,000).

By January, it should be more apparent whether the playoffs are in the Spurs’ sights. Luckily, when it comes to the markets, you do not need to win a championship to be successful. At this point, most would be ecstatic with an annual visit to the Conference Finals.

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November 23rd, 2008 at 01:04pm Brian

Entry Filed under: Basketball, Election, Wall Street

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