The abruptness of the fall seemed to indicate that despite the fact that polls had been indicating for some time that President Obama was likely to win, that expectation was not shared by many financiers.
While the stock market has done well since it bottomed early in Mr. Obama’s term, he aroused great hostility among Wall Streeters who opposed his call to increase taxes on high-income Americans and were concerned about increased regulation.
At a conference sponsored late last month by Wall Street’s chief lobbying group, the Securities Industry and Financial Markets Association, an adviser to Mitt Romney was not challenged when he said Mr. Obama had only a one-third chance of winning.
During the election campaign, it had appeared to some analysts that the market was rooting for Mr. Obama. Share prices generally rose this fall, but they slipped in early October after Mr. Romney showed gains in the polls after his first debate with the president. But the sell-off on Wednesday indicated that some shareholders were worried about what would happen now.
Some industry sectors, like finance and managed care, were particularly hard hit on Wednesday amid worries they would be hurt by tougher regulations and other adverse policies in Mr. Obama’s second term. Some also pointed to concerns that taxes on dividends and capital gains were likely to increase, making stocks less attractive.
The Standard Poor’s 500-stock index recorded its worst performance since June, falling 33.86, or 2.4 percent, to 1,394.53. The Dow Jones industrial average fell 312.95 to 12,932.73. It was the Dow’s first close below the 13,000 level since August.
If history is any guide, the one-day loss does not necessarily bode poorly.The stock market has often sold off on the day after Democratic victories in presidential elections, particularly when there had been doubt going into the election over who would win. But the market has tended to perform better under Democratic administrations than Republican ones.
Since 1928, there have been four postelection days when the market did worse than it did this year, with the worst showing coming four years ago, when the index dropped 5.3 percent after Mr. Obama won. It fell 4.6 percent after Truman won in 1948, 4.4 percent after Roosevelt was elected in 1932 and 3.3 percent after he won a third term in 1940. But in each case, stocks rose in the following four years.
By contrast, the market climbed 1.5 percent the day after Roosevelt was re-elected in 1936, but lost value during the next four years. It rose 1.1 percent in 2004, after George W. Bush won a second term, but lost 12 percent the next four years.
Many market strategists expect that the market will remain volatile between now and mid-January. If Congress and the president cannot come up with a plan to cut the deficit, hundreds of billions of dollars in Bush-era tax cuts are set to expire in early 2013 and automatic spending cuts will sharply cut the defense budget and other programs.
The tax increases and spending cuts, known as the fiscal cliff, could push the economy into recession in 2013, economists say they fear.
A Barclays analyst, Ajay Rajadhyaksha, said the “the worst outcome for the fiscal cliff negotiations was a status quo election,” because each party could see the result as a mandate for its own policies. “Unless one side softens its stance,” he added, “the chances of going off the cliff, at least temporarily, are higher” than markets were prepared for.
But Sherry Cooper, the chief economist of the BMO Financial Group, said she expected a compromise to be reached. “Obama is in a much stronger negotiating position now,” she said, adding that she expected a deal that included tax increases and spending cuts.
Article source: http://www.nytimes.com/2012/11/08/business/fiscal-impasse-leads-to-caution-after-election.html?partner=rss&emc=rss
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