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How Come There's No Bush Rally?

Rob Walker
Posted Thursday, Dec. 14, 2000, at 2:15 PM ET

Many attempts were made, both before Election Day and in the month-plus of uncertainty that followed it, to divine the stock markets' judgment of the presidential contest. Two popular observations were: 1) that the stock market wanted this thing settled and 2) that, more specifically, traders wanted Bush.

And so there's been some puzzlement about the conspicuous lack of a Bush rally on Wall Street. The Dow surged briefly Wednesday morning, following the Supreme Court decision that effectively ended all uncertainty, but this proved fleeting and all the indexes posted a lackluster close. This morning, after the finality of last night's speeches by both candidates, stocks are generally off.

The obvious reason for this is that company profits and the economy have a far greater effect on share prices. But this election season (and postelection season) happen to have included a number of attempts to put a political spin on the market's gyrations--a presumably potent tactic given the we-are-all-shareholders-now temper of the times. So it's worth noting just how questionable this line of spin really is.

In the latter half of September, for example, some pro-Bush pundits dismissed other factors that might have been causing stocks to have a lousy month and argued that the markets were simply bummed out at Al Gore's then-robust poll numbers. On Sept. 20--when the markets-fear-Gore line of argument hit a peak--the Nasdaq closed near 3,900. The Dow, at about 10,690. The S&P 500 at roughly 1,450.

And yet, as I write this on day one of the absolutely, unequivocally, beyond dispute here-comes-Bush era, Nasdaq is 30 percent lower than its Sept. 20 level at a little below 2,800, the Dow is essentially even at 10,680, and the S&P is down 7 percent at 1,350 or so.

This morning's official explanation for the lack of a Bush rally is that the markets had already "priced in" the good news of election finality. There may be some truth to this in the very short term--the Nasdaq, Dow, and S&P are all trading above their worst intraday lows of the chad-haggling period--but it fails to satisfy if you have a memory that goes back more than a few weeks. Specifically, if the markets wanted Bush, why would they "price" the fact of his victory lower than the September possibility of his defeat?

Now, am I unfairly leaving out all kinds of intervening economic and earnings news? Of course I am! But that's because I'm playing by the same rules as those who said the markets were cheering for Bush. One of the things that was supposed to happen in this election was that a broader group of voters would factor their portfolios into the political decision-making. Whether that actually occurred or not, the presumption that it would meant that market performance became something else to spin in an attempt to score political points. And in this arena as elsewhere, there's a gap between spin and reality.

Photograph of traders at the Chicago Mercantile Exchange on the Slate Table of Contents by Scott Olson/Reuters.

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Reader Comments from The Fray:


[Notes from the Fray Editor: Everybody knew the answer to this one: but the answers were all different. After reading large numbers of them our secret Fray favorites are "the traders are all drunk", here, and a recommendation to sing Wall St's top song, "Who let the bears out?", here. And searching for guilt in the collective Republican consciousness (MJK, below) was an appealing idea.]


I admit, I am disappointed. The reasons: 1) The Media has created a myth about Al Gore being a human being (based on his one-time Emmy-winning performance) and there are now doubts about Bush being the better man. We need at least two more weeks for these to pass. Cabinet appointments will change the perceptions. 2) Bush needs to get a tax cut passed. Because of bipartisan compromise, this cut will not help business very much next year. 3) Greenspan has been out of touch, and overkilled the Economy. If the Fed moves to lower interest rates this month, the rally will begin year end. The soft landing is still possible. I think Greenspan will get it done.

--George Majesko

(To reply, click here.)


Buy the rumor, sell the fact, or so goes the old Wall Street nostrum. Looking at all the charts however I can't find any evidence that anyone bought the rumor of the Bush presidency this year. I must therefore conclude that today's sell-off was strictly coincidental with news of Bush's victory, not caused by it.

I have no doubt however that partisans on both sides will be able to tell stories which confirm their beliefs. Maybe I can help all those story tellers avoid the trouble of writing their stories: If the market rises it will obviously have been caused by either Bush or Clinton/Gore, depending upon who is telling the story. If the market drops, it will obviously have been caused by either Bush, or Clinton/Gore, depending upon who is telling the story.

All such stories are already written and can be chosen and dispatched as events dictate. The stories will maintain that the characters in their stories are determining the market. In fact it is the markets' movements which are determining the stories. The result of minds seeking simple order in a complex world.

--Bob Pierson

(To reply, click here.)


Maybe it's because Bush has the less responsible economic program: he's the one with the ridiculous tax cut, while Gore was the one who wanted to reduce the $200 bn the US spends each year on debt service. Or it could be that the market has followed Greenspan and favorable Christmas shopping reports (both of which coincided with minor Bush victories in the past few weeks, leading people to the wrong conclusions) and doesn't give a damn about who is prez.

--Fletch

(To reply, click here.)


Well, if my clinical training and work in the unconscious aspects of human psychology is any help in understanding this matter, I would guess that the Market/country will react very badly to what has just happened.

First, many Democrats feel not just very angry, but more importantly very depressed. Not depressed because their guy lost, but because the need to deny the truth won over the need to know it. This is the recipe for depression. And when people feel depressed they withdraw from their environments (ie the Market.)

Secondly, many Republicans, while consciously thrilled that they have won, will suffer unconscious guilt over their aggressive need to win at the price of the truth. And, ultimately, they become depressed, self-destructive and withdrawing as a result. Only the true sadists (or sociopaths or professional traders) will be able to easily buy. Can the Market stay positive without the folks?

I hope, for the sake of my little portfolio, that I am wrong.

--MJK

(To reply, click here.)

(12/15)

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