So the market is down for the second day in a row following the election.Today was actually looking worse earlier in the day, but regardless, the fact that two notable red days are happening right after the election is causing a lot of dot-connecting.
The theory that we’re hearing most promulgated in the media is: Obama’s winning is freaking people out over higher capital gains, and furthermore we’re going to go over the cliff.
But the problem with this theory, is that it runs 100% counter to what people were saying literally 48 hours ago.
Then, people were saying that Obama was bullish for stocks (because he’d renominate Bernanke) and that Romney would be bad because of austerity in tight money. Furthermore, the Obama election had become solid conventional wisdom by this weekend, and nobody expected the Democrats to gain the house, so really this whole outcome was expected.
So this was a completely expected outcome, and the public story was that Obama was better for stocks.
So what’s another theory?
Here’s a simple one. This is just your good-old-fashioned sell-the-news rally. Obama’s win was expected, and Obama was seen as more bullish (because of Bernanke) and then it happened, and there was no more big “catalyst” or event, so the market is letting off steam.
Also: This really might not have anything to do with the election.
Could all be Europe.
Or maybe not that either.
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