As stocks rose on Election Day 2008, the media were more than happy to credit investors’ excitement over Democratic nominee Sen. Barack Obama’s chance of winning. But when stocks tanked in the days following Obama’s election, concern over Obama’s economic policies was the last possible culprit.
The Dow fell four trading days out of five following the election and by the close Nov. 11 was still down more than 600 points from its Nov. 3 close. Stocks were also trading lower on Nov. 12 "after Treasury Secretary Henry Paulson announced changes to the government's bailout plan," according to [1]BusinessWeek.com. The Dow had shed over 3 percent by 11:35 a.m. according to the article.
Yet, one global news agency trumpeted the biggest Election Day rally “in history” as an “Obama effect,” while many others declared that investors were simply “relieved” to see the end of the campaign.
Agence France-Presse (AFP) claimed Nov. 8 the market was reacting to Obama. “The economic downturn rapidly overshadowed the euphoria over the election of Democrat Barack Obama … the ‘Obama effect’ lasted only one day, as voters headed to the polls.” AFP emphasized that the rally was the largest Election-Day rally “in history,” without mentioning that before 1984 the stock market was closed on Election Day.
The Associated Press wire service toned the sentiment down, but still gave Obama credit on Nov. 5 saying, “Stocks appeared set to hold on to their gains following word that Barack Obama had been elected president.”
But then the markets went into what CNBC’s Melissa Lee termed a “tailspin.” Nov. 5 and 6 losses became the worst two-day decline since the 1987 crash, but the three networks placed no amount of blame on Obama.
Out of 23 stories on ABC, NBC and CBS only one asked about the “notion” that the election outcome could influence the stock market negatively.
But a column by personal finance expert Terry Savage for TheStreet.com admitted bitterly that the drop “smacked of Wall Street pique that the next president appears to be no friend of ‘the Street.’”
Savage admitted to being “more than a little annoyed that the stock market greeted the election results with a two-day nosedive.”
[2]The Wall Street Journal said Nov. 6 that “commentators concluded that Wall Street was welcoming Barack Obama with a [3]Bronx cheer.”
When the market is up, it’s Obama
Investors seemed to have “election euphoria” on Nov. 4 according to the media.
The Los Angeles Times said the rally “appeared to reflect hopes for better days ahead.” “Hope” was one of Obama’s campaign slogans.
AP’s Financial Wire indicated Nov. 5 that the market rally was based on expectation of a “Democratic sweep.” That story quoted Jack A. Ablin, chief investment officer at Harris Private Bank, who said, “Everyone was buying the rumor yesterday and selling the news today … The market had not only anticipated an Obama victory, but from what I’m gleaning, pretty much a Democratic sweep.”
Other outlets gave Obama and the Democrats less credit. The market rally was a sign that investors were relieved to see the end of the campaign, according to CBS “Evening News” anchor Katie Couric Nov. 4.
USA Today didn’t give Obama any specific credit for the stock market rally on Nov. 5, but ran an article [4]“busting” the “myth” that Republican presidents are better for stocks.
“Let’s bust one myth: namely, that Republican presidents are better for stocks,” USA Today said. “It is not true. In election cycles since World War II, the Dow Jones industrials have posted bigger average returns under Democratic presidents, the Stock Trader’s Almanac says.”
When the market is down, blame retail sales and jobs data
Then stocks nosedived – the Dow Industrial Average fell nearly 1,000 points in two days Nov. 5 and 6. But there was a contradiction in news reports about the drop; it seemed Obama could impact the market positively, but not negatively.
Chris Cuomo was the only network reporter to ask about a potential Obama connection to the drop. On Nov. 7 “Good Morning
Golodryga dismissed the idea saying, “A lot of people are worried about that. The fact that Obama won was something that was really factored into the market, going back a few months ago. Remember the market is a forward looking indicator. Right now, we’re just dealing with these really, really bleak numbers coming out regarding the economy. And there’s also profit-taking as well.”
Another ABC reporter, Betsy Stark, oddly suggested that investors had stopped paying attention to the economy on election day, but turned their attention back to the economy” causing the stock market drop.
Network reports and print stories placed responsibility for the market plummet on recession fears, “very, very bad” job news and poor retail sales figures.
The jobs news was bad – 240,000 jobs were lost in October and the unemployment rate rose to 6.5 percent – but the numbers were released on Nov. 7 the only day the Dow closed up between Nov. 5-11.
As for [5]recession fears, the media have hyped that threat for the past few years, long before the
It was simply inconceivable for most journalists that investors might have been assessing the next president.
A different ‘Obama Effect?’
Forbes.com was one of the only media outlets to analyze the situation differently. Steve Schaefer, Markets Reporter for Forbes was “ [6]Looking for the ‘Obama Effect’” in his Nov. 5 article.
According to his analysis, the market’s dive was somewhat related to Obama.
“Wall Street tanked Wednesday, as investors fixated on weak economic indicators and pulled the prior session’s gains off the table. The market was also beginning to visualize what a Barack Obama presidency will mean for business, after the
But Schaefer cautioned against reading “too much into Wednesday’s trading.” Schaefer’s story admitted that certain types of businesses might be “at risk” under Obama, including tobacco, “Big Oil,” brokers, pharmaceuticals and others.
Schaefer’s article stood in sharp contrast to Savage’s column on TheStreet, which exuded hope despite Obama’s plans to raise taxes and potentially harm businesses.
But Savage’s column, “Obama’s Impact on Economy? Priceless,” praised Obama, who “has given ample demonstration of his insight [and] intelligence” while advocating for tax cuts because they spur growth.
Savage said [7]“the world, and the markets, should be filled with hope” that Obama follows the tax-cutting example of John F. Kennedy.
But Obama has made it clear that he intends to raise taxes, even in the face of that information. During the primary debates Charles Gibson asked Obama about raising taxes when capital gains tax cuts produce more revenue than tax hikes.
“I would look at raising the capital gains tax for purposes of fairness,” Obama replied. According to America 2012, a Business & Media Institute special report, Obama’s plan would raise capital gains taxes on [8]about half of American households.