2011 - Obama's 3rd year in Office

I've came across several articles recently about the variation in US Presidential Politics ahead of re-election. The argument is simple; potentially unpopular policies and laws are passed at the beginning of a presiding government term as opposed to more popular laws towards the end of term so that the presiding government will stand better chances of re-election. This simple argument is based on the bias of recent memories, in other words, people tend to remember recent past better than what happened several years ago.

Below is a table summarising the S&P 500 annual changes in %: 1962-2010 (13 election terms):



Of course the amount of data we can rely on is statistically seen, tiny. Yet it provides some indication to a more positive performance, in the second half of the US Presidential term. Especially the 3rd year of a term, has historically seen much growth.

44th US president and the Markets

Yesterday (20th January 2008) saw the Dow Jones drop by a massive 4%. The fall on the market came on the same day Barack Obama was sworn in as the 44th US president. Notice all these 4, by the way, only joking lets better not look for such patterns :-)!

As explanations and analyses for this drop began to appear in the financial media, I was just thinking to myself, this is just very, very, very bad. The media, brought forward a number of reasons for the drop;

1. the first reason - bad company reports, such as Bank of America, JP Morgan, City Group, Bank of New York Mellon (88% fall in profits) or others - just check out this bbc.finance article.
2. the second reason - apparently the speach that Obama gave at his inauguration, highlighted how bad the challenges for the US economy really are.

It is clear the bad company news are negative and the challenges highlighted by President Barack Obama might have hit a nerve with investors.

Imagine this however;

1. a young, determined president takes office and promises to adress and deal with the economical challenges directly and as swiftly as humanly possible
2. after an avalanche of negative quarterly reports, finally a positive one appears as IBM announces surprisingly good profit forecasts above analysts expectations.

So among all the bad news... especially yesterday had the chance to be a good day, but the markets decided otherwise. This shows that current market mood seems to fuel negative moves and if the mood isn't right, the whole market won't be.

Monday 8th Dec 2008

FTSE rose to 4300 by 6% today. A good time to sell short might be tomorrow, this depends on overnight movements in markets. However 4400-4600 is a strong resistance against upward moves, so plunging into any long trades with both feet would yet not be a wise move.

Todays' bullish world market performance (Nikkei 5.20%, DAX 7.63%, CAC 8.40%) is attributed to Barack Obama's rescue package plans [see http://biz.yahoo.com/ap/081208/wall_street.html].

New Wave of Government Intervention

Wednesday & Tuesday have seen positive market action since that huge 10% rise in Western Europe Markets. The current consolidation seems to have some momentum!!!

New Wave of interventions have been anounced this week:

• Monday, the UK anounced it will cut VAT to 15% from 1st Dec. 2008
• European Union anounced a $200bn euro recovery plan http://news.bbc.co.uk/1/hi/business/7749382.stm
• Barack Obama began detailing his rescue plans for the economy, http://biz.yahoo.com/cbsm-top/081126/210d57da98961961a24ddd903b6b0cec.html
• China Slashes interest rates by 1.08% (biggest decrease in 11 years) http://biz.yahoo.com/ap/081126/as_china_economy.html

However the crisis is on, and untill any help propagates through the system many months will pass.

Jobless claims remain at recessionary levels, Americans cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to U.S. factories plummeted and homes sales fell to the lowest level in nearly 18 years. [source: http://biz.yahoo.com/ap/081126/financial_meltdown.html]

Market update, 2 weeks after Obama election

It's been exactly 2 weeks since the election of Barack Obama, who is sheduled to be sworn in as the 44th President of the USA on January 20, 2009.

On the day of election the Dow Jones was up 1.5% from previous close, in fact 4th November was the highest price for past month. Since Obama's election, markets haven't been doing too greatly, but also there is some talk about an easing situation in media. Compared to month of October this clearly seems to be the case, however the bottom of markets is ony beeing tested at 8K (Dow Jones), 4K (FTSE-100), 7K (Nikkei 225), 4.2K (DAX), 3K (CAC 40) and another drastic drop might be around the corner. For the next 2 days or so, we might however see some positive consolidation, as the 8K (Dow Jones) bottom is beeing tested.

More rescue packages have been approved by the likes of emerging economies such as China (over $500bl) and today a drop in inflation was reported to 4.5% from 5.2% (United Kingdom). Yet the crisis may be still worse than it appears. There are huge manufacturing decreases, redundancies and problems (at least unexpected changes) with implementing rescue packages are starting to creep out with the USA $700bl plan.