"OOPS: Financial Pundits Predicted The Stock Market Would Plunge Under Obama"
The Dow Jones reached an all-time high of 14,200 today, besting the pre-financial crisis record set in 2007. The robust gains may surprise many Wall Street analysts and cable news prognosticators who, just a few months ago, were raising the alarm that an Obama reelection would send the market into a tailspin.
During election season, experts warned that Obama’s intent to raise the capital gains, dividend and corporate taxes would hurt investments, while Mitt Romney’s business-friendly attitude would lead to a first day rally. It soon became “conventional wisdom” in the financial sector that the stock market would favor a Romney win, while an Obama second term would be disastrous.
Echoing a Romney campaign talking point, a chief economist at Gluskin Sheff praised Romney on CNBC as “a candidate that could more readily come to a compromise with the opposition” over the fiscal cliff deal, and would be “overall better” for the markets:
Fox Business seized on market gains the day after Romney’s first debate performance as evidence that the stock market was rooting for a Romney win. After Election Day, the network lamented that Obama’s win caused a market dip, which was actually a reaction to bad economic news from Europe and the impending fiscal cliff fight in still-gridlocked Congress:
CNBC market analysts also stoked the panic, hosting a Barclay’s Capital manager who suggested Obama’s reelection would spark a recession like the one in 1948:
Even after the stock market continued to improve after Obama’s re-election, this same “conventional wisdom” prompted many investors to dump stocks at the end of last year, fearing an uptick in the capital gains tax.
The stock market has rallied this year on optimism that the U.S. housing market is recovering and signs that companies are hiring more. Strong corporate earnings and continuing economic stimulus from the Federal Reserve have also boosted stock prices.
Despite having already logged strong gains this year, stocks may still be able to maintain their momentum as investors move money out of bonds, Rob Lutts, chief investment officer at Cabot Money Management, said.
Conservatives have long tried to paint Obama as the “most anti-business” in history, ignoring the fact that corporate profits have skyrocketed to record highs in the past four years. Historically, the stock market has fared better under Democrats than Republicans.
Analysts predict the market will enjoy continued highs for the time being. However, according to the AP, investors are also bracing for setbacks to economic growth thanks to the automatic budget cuts that went into effect last week.