Obama and the Surge

Michael C. Moynihan | November 5, 2008

Does Europe love us again? Are America's deep cultural and racial divisions healed yet? Would there be, as the Los Angeles Times headlined, "an Obama surge on Wall Street, and beyond?" A few economic stories that caught my eye, arguing that an Obama victory might spark a rally in the stock market:

Toronto Globe & Mail:

So, if investors have woken up this morning to find Mr. Obama is president-elect, good for investors; history suggests it's a sign that things are looking up. Then again, they were probably bound to get better anyway.

The Washington Post:

Stocks staged the largest Election Day rally in history yesterday, bucking tradition and casting aside growing evidence that the country is slipping into a recession.

The end of the presidential contest between Sen. John McCain (R-Ariz.) and Sen. Barack Obama (D-Ill.) eliminates some uncertainty at a time when traders are searching for an end to the recent market volatility and trying to grasp the breadth of a recession that many assume has already begun, analysts said.

CNN/Money predicted a market surge today, writing that "analysts" were confident that "stocks will likely get a boost regardless of who wins..." Andrew Young predicted that "There would be a boost of 1,000 points on the stock market the first week after he's elected." The Telegraph wondered if a "Barack Obama victory [will] boost shares."

But the Dow took a dive today, dropping 5 percent—almost 500 points—by close. The Guardian was surprised that the "historic election win failed to spark a worldwide stockmarket rally today." The Daily Mail was puzzled that the "Obama Bounce prove[d] elusive." The market slide can most assuredly not be attributed solely to the election of Barack Obama (though the Hannitys of the world will doubtless try). After all, we have been seeing this sort of market schizophrenia for the past few months. But to all of those who saw in Obama's victory some sort of economic panacea—and believe me, I have spoken to plenty of people who, like Andrew Young, believed an immediate market recovery would follow the rejection of the Republican Party—I'm here to remind you that it ain't going to be that easy.