The stock market is always right. Nonetheless, I must admit to being more than a little annoyed that the stock market greeted the election results with a two-day nosedive, the worst two-day decline since the crash of 1987. Even Friday's 250-point gain was little solace.
It smacked of Wall Street pique that the next president appears to be no friend of "the Street." But the economic platform of our new president came as no surprise, so why the selloff?
Yes, he promised to tax capital gains at the same rate as ordinary income, which would represent a huge hit to those who still have any capital gains remaining. But the smart money had already priced that fact into the stock market, selling earlier in the campaign as the candidate's momentum picked up.
Certainly, President Obama will take a more populist approach to digging America out of its economic mess. But realistically, how much more could Wall Street have expected in the way of aid from the government? More than a trillion dollars has already been injected directly into the banking system by way of guarantees and capital stock purchases.With the global financial markets resisting transparency, clarity and centralized clearing of transactions, all the liquidity in the world won't restore trust and spur lending. So why not try from the other end -- by helping the debt-ridden consumer? On balance -- priceless! The stock market, as measured by the Dow Wilshire 5000 Index, lost $1.2 trillion in the two days following the election. Part of that came from fear of the unknown impact of the next president's (and Congress') planned policy changes and spending programs.