The Day After: Is the Honeymoon Already Over?

One day after the best election day return in the Dow's history, today's early trading has erased a lot of those gains.  In the table below, we highlight the DJIA's return the day after election day for each presidential election since 1900.  As shown, if the early trading holds up, we are on pace for the worst reaction to an election since Truman won in 1948.  Interestingly, the only times the DJIA has ever declined by more than 1% (gray shaded areas) the day after a presidential election were when the Democratic Party won complete control.

The average overall return the day after an election when the Democratic Party is elected to total control is a decline of 0.82% (ten periods).  Conversely, the DJIA has risen by an average of 1.28% the day after the Republican Party wins total control of the Oval Office and both Houses of Congress (eight periods).

click to enlarge

Comments

[ddtuttle:]

This isn't about Obama or the Democratic congress, its about the two and a half long months before we get rid of our lame duck president and congress. Go back 2.5 months in your mind then project more of the same going forward ....

2008 Nov 05 12:10 PM

[Robert Nabloid:]

The honeymoon isn't over yet. Didn't you see those people last night? There's no way the rosey glasses are coming off for a while. Time, we'll see one way or another. Just remember, a lot of his economic advisors are from GS, and the Clinton Administration, which only helped us get to where we are today (sub-prime) and Obama wanted the $700 billion bail-out... If government bail-out packages are the order of the day, well...

If America had wanted real change supported by the founding fathers and the constitution, they would have elected Ron Paul, but he's just another old white fart... not quite as interesting a story as the one they have today.

Obama's heart is in the right place, but the devil is in the details... change needed to be defined and explained how it would come about, and it wasn't adequately done so, IMHO. So, no one really knows the full extent of what we are in for, good or bad. Time will tell.

2008 Nov 05 12:25 PM

[Crank Monkey:]

Obama is a Marxist. This won't be good for markets.

2008 Nov 05 12:49 PM

[who:]

more like a hangover...then wake up to reality...

2008 Nov 05 12:52 PM

[Bespoke Bul...:]

Going out on a limb here, but maybe the sell off today has something to do with the fact that the equity markets (all of them) have gone up more than 15% in the last 10 days or so???

Seriously, why do these guys still post this nonsense and look at things in vacuum?

2008 Nov 05 01:05 PM

[Socialism c...:]

Marxism is NOT profitable. Cap gains taxes to rise. Dollar is headed lower with the Fed printing money left and right...but mostly left. Why invest in America? Give me one good reason!

2008 Nov 05 02:03 PM

[olson:]

The after-election "pattern" looks random.

2008 Nov 05 02:41 PM

[RatWatcher:]

Nationalize retirement accounts = sell before he can! Pay 10% penalty to save the balance! Your IRA or 401K is in jeopardy here folks!

2008 Nov 06 01:48 AM

[masscraft:]

Election has nothing to do with it. Any fear about Obama winning was already priced into the market as he had a significant lead.

2008 Nov 06 07:52 AM

[kebu77:]

Bush I and Clinton were fiscally responsible (tax increases and, for Clinton, working with a Repub cong). Bush II ran the country into a ditch, as Ross Perot would say.

Obama has said he would make energy his top priority. Pickens isn't finished talking, either. Given the liquidity trap possibilities and the credit crunch, he and his advisers may rightly conclude that direct investments in energy, infrastructure, and mil and non-mil goods are needed.

One suggestion is to identify and down-size aging fed, state and local govt cars and trucks. Buy American, possibly as part of a larger program to keep GM-Ford-Chrys. in the game. Park the old ones and parcel them into the auction markets over a couple of years...

Best hopes for optimal bipartisan actions to address the crises now and after 1/20.

2008 Nov 06 10:48 AM

[Socialism c...:]

@kebu77: Obama's idea of "making energy his top priority" apparently means to price carbon so high that anything non-solar or non-wind will become unaffordable. That's not such a great thing for his entitlement voting class! Oh...did you see about his campaign workers who are now complaining they didn't get their full pay amounts? Seems he's off to a great start already with disappointing his base. Watch for more of that.

2008 Nov 06 11:04 AM