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Since the Economy is the Number One Issue...

Shouldn't voters wonder why the market seems to react positively when there are signs that an Obama win might not be a done deal?

Update: James Pethokoukis has this to say about the Obama effect on the market:

Are investor concerns about an Obama presidency influencing the stock market? And by "concerns" I mean "existential panic." And by "Obama presidency" I mean "a tax-hiking and regulatory reign of terror." And by "influencing" I mean "eviscerating." At least that's the overwrought take I get from a few of my more skittish E-mailers. Chillax, y'all!

Now a few of my own (more tranquil) observations about a possible jittery Investor Class, the plunging market, and the now famous Obama Discount Theory:

1) I find it hard to believe that fears about a deep recession are suddenly dawning upon investors and thus are solely responsible for kneecapping the market. I've been hearing such dire forecasts for weeks from top Wall Street economists, and I really think they're already baked into the cake. (And credit markets actually look like they are finally picking up a bit--a plus for stocks.) So with that perception locked in, maybe the future political landscape is finally playing a greater role in the minds of investors, especially with polls showing a possible landslide Obama win and big Democratic congressional majorities. Is it really more plausible to suggest no effect whatsoever from a possible once-a-generation, political sea change, especially one that moves away from the winning economic formula of the past 25 years ? Not even a smidgen of worry? C'mon, now.

2) Obama wants to raise capital gains taxes on a good chunk of the money currently in the market. Nearly 80 percent of total stock holdings are held by people who would be subjected to higher investment taxes. Not only does that hurt their future after-tax returns, but it also undercuts the future productivity of the economy, thus crimping the future stream of earnings generated by corporate America. So the whole stock market will suffer from a sort of collective tax punishment. Hey, even potential Obama treasury secretary Jamie Dimon thinks raising taxes right now is a goofy idea.

3) Then there's the Joker Scenario, inspired by one of my favorite schemes concocted by the Clown Prince of Crime. It's the one where he poisons various toiletries like shampoo, deodorant, soap, and toothpaste. But only when used in combination are they deadly. Investors might not be worrying so much about a Democratic president, given the current one-way state of the polls, as they are about the combo of Obama + Nancy Pelosi + Harry Reid. And you can toss Charlie Rangel and Barney Frank into the mix as well. Recall what Frank said the other day: "Yes, I believe later on, there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of this money." Look for Democrat proposals for a "millionaire's surtax" on top of the higher rates from repeal of the Bush tax cuts in 2009. Or how about this idea to do away with 401(k) plans. Maybe the risk of a deluge of ill-conceived ideas is apparently why, according to my pal Amity Shlaes, split power in D.C. produces an average 9 percent positive return for stocks vs. a negative 8 percent when one party holds Congress and the White House.

Read the rest.


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Comments (10)

I wondered if it was a coin... (Below threshold)
pjaykc:

I wondered if it was a coincidence that the market had been going back up until the day that one poll came out showing Obama 14 points ahead--then it tanked again.

Both our candidates could u... (Below threshold)
Charleen:

Both our candidates could use a little economics 101 right now. Obama has hammered McCain over deregulation of the stock market but what Obama doesn't get is that it was actually regulation that caused this crisis. A little regulation is important but the Government went overboard. Greenspan likes to use the analogy of taking the punch bowl from the party- well the regulators may have removed the punch bowl but then they brought out the jello shots!

Obama's recovery plan is crazy and has more in common with Hugo Chavez than anything else. I wish he would read this article by Steve Forbes. Forbes is a great writer with true mastery of the market. Capitalism is his solution for our current slump and I think he is on to something.

Head it for yourself. And if you can, pass it along to the Obama campaign because they really need it. http://www.forbes.com/hcome/forbes/2008/1110/018.html

Always connected. Maybe DJ ... (Below threshold)
WildWillie:

Always connected. Maybe DJ will post on past elections and the stock market. ww

Of course the market... (Below threshold)
Larry:


Of course the market is tanking based on Obama winning.

Obama won't say a word. If he is elected, the market will tank and then he will announce that he is suspending the capital gains tax to bring it back up.

End of story.

ALERTThe sky is fa... (Below threshold)
JFO:

ALERT

The sky is falling, UFO's have been sighted, pollution has increased, Communism is coming back to Eastern Europe, crime has increased 2000%, the chickens don't lay, the roosters don't crow, the sun sets in the east, the army is ready to mutiny, the navy is sinking its ships ALL BECAUSE of Obama.

Yep, another insightful analysis from the deranged and looney right.

The market will probably op... (Below threshold)

The market will probably open down 500 this morning. Wouldn't put too much stock (pun intended) in short term market swings.

There is more driving this market than Obama. Many institutions are concerned about mere survival.

JFO, once again your brilli... (Below threshold)
WildWillie:

JFO, once again your brilliant and insightful analysis. Are you allowed to be on the computer in first grade? SOOOOOOOOOO immature. ww

I know this is way way way ... (Below threshold)
JFO:

I know this is way way way way way way way over your head willie - but it's called SATIRE.

I noticed the correlation ... (Below threshold)

I noticed the correlation between Obama's poll numbers and the stock market last summer. It is notable that Obama got real traction in the polls the last 2 days that the Dow was over 11,000 (8293 as I write this). Most liberals won't admit that there even could be a correlation, their argument (for what it's worth) rests on the idea that the stock market does not look towards the future. Obama and the Dems have proposed: Increased dividend taxes, increased corporate taxes, increased capital gains taxes, increased taxes on those who do most of the non-retirement related stock investing, they have even recently suggested taking 401Ks and putting them in the Social Security "Trust Fund" (early in the Clinton admn. there was a serious look at a "one time" 20% tax on 401Ks and IRAs), these dumb ideas have consequences no matter how comforting it is to believe that they do not.

This final week and a half of the campaign should metaphorically feature Sarah Palin riding a horse through Wall Street yelling, "the Democrats Are Coming! the Democrats Are Coming!"

JFO's post, as originally w... (Below threshold)

JFO's post, as originally written and not intended as "satire":

The sky is falling, UFO's have been sighted, pollution has increased, Communism is coming back to Eastern Europe, crime has increased 2000%, the chickens don't lay, the roosters don't crow, the sun sets in the east, the army is ready to mutiny, the navy is sinking its ships ALL BECAUSE of BUSH!!!1!!111!




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