Even as stock market indexes drop in unison on Obama’s Inauguration Day, our spirits were up. Weren’t you uplifted by yesterday’s presidential address?
It’s a new beginning for America, and I’ve never been more hopeful. This goes down as one of the most invigorating and refreshing speeches I’ve heard in a good long while (I’m sure there’ll be many more where it came from). Even my father, who is visiting from abroad and who isn’t a citizen proclaimed: “That brought tears to my eyes, and I’m not even American!” It’s good to know we’ve got a new president who can elicit such moving and positive emotions from the rest of the world. Just good to know.
Yesterday’s spirit-rousing events didn’t help the stock market though, which had a mind of its own. The Dow Jones index dove 4 percent yesterday to just under 8,000. Other indexes fell by bigger percentage points with the S & P down by 5.28% and the Nasdaq down by 5.78%. Ow.
Just as Obama made history, so did the stock market, by marking this movement as the largest Inauguration Day drop for the Dow in its entire 112 history. Just check out some historical index closings during past inaugurations:
Historical Dow Closings on Presidential Inauguration Days
| President | DJIA | Point Change | % Change |
|---|---|---|---|
| George W. Bush (second term) | 10489.94 | -50.03 | -.47% |
| George W. Bush (first term) | 10887.36 | 299.77 | 2.83% |
| Bill Clinton (second term) | 6813.09 | -20.01 | -0.29% |
| Bill Clinton (first term) | 3310.03 | 54.04 | 1.66% |
| George H.W. Bush | 2342.32 | 103.21 | 4.61% |
| Ronald Reagan (second term) | 1286.77 | 59.41 | 4.84% |
| Ronald Reagan (first term) | 947.27 | -23.72 | -2.44% |
| Jimmy Carter | 954.37 | -14.30 | -1.48% |
| Richard Nixon | 999.02 | -27.17 | -2.65% |
One thing jumped out at me here — do you see where the Dow Jones stands today compared to past Dow closings? Seems like public confidence fell hand in hand with the stock market over the last 8 years.
Why Did Stock Market Indexes Drop?
Now should we be puzzled by yesterday’s market behavior? Not really, since the performance of the markets wasn’t really tied to what was going on in Washington yesterday. The markets only respond to news that it sees as relevant to the financial community, and in this case, the last few days were fraught with negativity and worry, as investors continue to fret and fixate over the state of vulnerable banks:
U.S. financial losses from the financial crisis may reach $3.6 trillion, according to New York University Professor Nouriel Roubini, who predicted last year’s economic and stock-market meltdowns. He says: “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”
So are we broke? We very well could be, but we remain hopeful that somehow we can turn this mammoth of a mess around. Because we really can’t afford to be anything but hopeful — it’s all we have at this point. Besides, we’ve got Obama at the helm, right? Let’s see what he can do. Hail to the new Chief!
On to other financial news!
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{ 6 comments… read them below or add one }
Well, the Dow has always had a mind of its own, no matter the occasion. That said, I guess even the most cynical amongst us did expect Obama’s inauguration to have a positive spillover on to the Dow, but the bear refused to budge and plans to stay put for some time to come. Not much we can do there, except to pray that the market sentiments will change in the near future. As for Obama, well everyone expects a lot from him, hope that he is able to deliver on all fronts, from terrorism to economy.
Interesting. I guess different people could read a lot of different things into these numbers.
There isn’t that much for a trader to do on inauguration day — new Presidents rarely make major economic pronouncements during their first speech. So it looks like this was more related to the bad news from the big banks — unless everyone was hoping Obama would announce a specific new subsidy or bailout.
The economic conditions are indeed bleak. The market also is down a whole lot already due to that. There are plenty of reasons to think it will go down, and plenty to think it will go up. next year most likely the economy will not be good. It will be very surprising if more people are employed August 1st than are today. But where the stock market will be is much harder to guess. If someone knows they can make a huge amount of money (well, also they can’t know). But if they could have a good likelihood of predicting then they could be rich. In fact if you can do that, you pretty much could ignore most personal finance advice and just live off your huge profits. The market nearly gained back all the lose of yesterday, today.
We think worldwide market waiting for Obama’s statement not just in the USA. Congrat for US people. We hope more from your new president.
SVB,
I’ve been following along via RSS, but haven’t been to your site in awhile. I like the design a lot. Nice work.