Market rallies after the innauguration tomorrow!?

Sensei answered 10 months ago …

If your question asks, "Will there be a market rally on Wednesday to Friday?" (i.e. after the inauguration), that's anyone's guess. But if you're asking whether the "Changing of the Guard" will result in a rally, the answer is no. There is no reason to believe this will happen - and lots of reasons to believe it won't.

Markets react more to a change in the president of Apple than they do to a change in the president of the country. It's about the money; not about the politics. For all the euphoria by the (left-wing) media over the new president, Barak Obama is not Roger Ramjet ("Hero of our Nation".) The economic issues of the day are global and there is little the president can do to change that. We will come out of this, and it may happen on President Obama's "watch", but it won't be because of him. It will be because of the actions of the global economy.

For those old enough to remember, there was a lot of hope and joy when Jimmy Carter became president (certainly one of the worst presidents in US history) and "we" got rid of the poison from Nixon and Watergate. And the economy tanked. (the Arab oil embargo?)

Bill Clinton was fortunate that the tech bubble didn't come to full fruition on his watch. That disaster occurred in the first couple of years of the Bush administration. And imagine if Bernie Madoff had come to light in 1996, instead of 2009! Even at that, the "wonderful economy" of the Clinton years really didn't happen until the Republicans took control of the Congress (and the Dow went from about 3,700 to over 10,000.)

For all of the hatred toward Bush43, the media has conveniently forgotten that the market indices hit their all time highs during his administration. (I'm not necessarily a fan of "W", but he wasn't the worst president the US ever had either. History will vindicate him.)

The point is that it isn't the president that matters. It's what's going on around the world. Maybe it would be different if this was just a domestic economic issue. But it is not and there is precious little that President Obama can do to fix it all by himself.

One more thing ... It is generally agreed that the markets are anticipatory. Obama was elected in early November. Given those two things, if the presumption of a new political administration creating a rally is true (the gist of your question) then the election of a new president - and a Democrat at that (i.e. not another Republican) - combined with the total domination of the Democratic Party in the Congress should have produced an incredible euphoria that should have driven the markets sky high. The reality was that the S&P DROPPED over 30% in a couple of weeks and has been stuck in the doldrums ever since.

There is no reason to believe that the inauguration of President Obama will result in a market rally of and by itself. It's his fiscal policies combined with those of other world leaders that will get us out of this. I wish President Obama the best of fortunes - for his sake as well as ours. I hope he turns out to be the leader we all hope him to be. We need the kind of inspiration that only a great leader can provide. I hope he's that man.