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Northwest businesses post-election: Whither the markets?

The initial market dip after Obama's re-election was nerve-wracking, but will the months ahead see more growth?
The Dow Jones, S&P 500 and Nasdaq plunged after Tuesday's election.

The Dow Jones, S&P 500 and Nasdaq plunged after Tuesday's election. Google Finance

The Dow Jones, between Wednesday and Friday of this week.

The Dow Jones, between Wednesday and Friday of this week. Google Finance

So, was it the economy after all that was the deciding factor in the presidential election?  Voters apparently saw some signs of life after the worst downturn since the Great Depression, rather than a failed economy after four years, to re-elect President Obama so decisively. Still, the market's reactions to 2012's election were unpredictable, spiking nearly 100 points on election day before crashing a full 300 the day after. 

Generally, markets are relieved when an election is decisive. The market wants predictability, so when it does not get what it wants, it reacts. In 2000, when the election between George W. Bush and Al Gore took five weeks to settle, the markets dropped 5 percent. In 2004, when the race was not settled on election night, the Dow Jones Industrial Average slid 18 points. On Nov. 4, 2008, the market saw a new Obama administration that would address the financial crisis and deep recession. The Dow was up 305 points to 9,625.

This year was a little different. The Dow had a few good days in advance of the 2012 election, rising 133.24 Tuesday to 13,245.68, after a modest gain on Monday. But the day after the election, markets dropped sharply. 

Most analysts said the market was putting the election behind it and now focusing on the rough road ahead. The U.S. economy faces problems in Europe, slowing global growth, stubbornly high unemployment and the so-called fiscal cliff. 

Pacific Northwest-based businesses generally followed the overall market down. Most lost about 1.5 - 2.5 percent of their value in the day after the election, about the same as the market. The Dow lost 312 points or about 2.4 percent.

Boeing dropped $1.47 to $70.11, a 2 percent drop, joining other defense-related companies that saw their stock prices fall as well. A Romney victory was thought to be good for the defense companies because of increased military spending. On the retail side, Amazon.com lost $5.50 to $232.06, a 2.3 percent decline. Costco was off $1.49 to 97.30, a 1.5 percent slide.

Starbucks actually bucked the trend, though not by much. Starbucks was up 10 cents to $51.81. Another company to go against the overall market was Weyerhaeuser, up six cents to $27.29, likely a reaction to the improving housing market.

Take a close look at Expeditors International, which helps companies move goods around the world. It reported its third quarter earnings on Election Day with both revenues and profits down. It is a company that interacts with that global economy every day, so not a bad bellwether of how things are going around the globe. Expeditors lost 73 cents on Wednesday to close at $37.15, a 1.9 percent drop.  Since that decline is close to the overall market drop, it is hard to make much of it.

Generally, markets have been down since the election, although trading Friday appears to be a bit more positive. Boeing, one of the 30 companies in the Dow Jones Industrial Average, is bucking the trend somewhat, gaining about $2 a share and is trading higher than it was on Nov. 5 before the election. Costco is also gaining back some of its losses, up about 85 cents on Friday.

What’s the market trying to tell us? Generally, the stock market looks ahead (it is one of the leading economic indicators) and tries to see what economic conditions will be like three- to six-months down the line. Like much of the economy, it is sending out mixed signals – up more than 100 points on Election Day, down more than 300 the next day. 

Overall, the economy is sending out mixed signals too. Job creation is a bit stronger, but not nearly as robust as it needs to be. Housing prices are looking a little better. Prices are stable and interest rates low. On the downside are the international problems and that fiscal cliff, the automatic tax increases and spending cuts put in place by Congress. And many people are still holding back spending because of stagnant wages or concerns about jobs. With low demand, business does not have the incentive to invest in new jobs.


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Comments:

Posted Fri, Nov 9, 3:43 p.m. Inappropriate

One glaring addition to the metrics: The day after the 2008 election, the DJIA cratered 5%, the largest loss ever recorded right after a US Presidential Election. My sense is that Obama is every bit as friendly to big money as any Republican (the proof is in Tim Geitner and his primary role in promoting TARP, etc. - as far back as when he was NY Fed chief during the Bush administration). I suspect the market will recover, with the help of lots more quantitative easing, and the continuing loss of our purchasing power.

siderod

Posted Sat, Nov 10, 8:28 p.m. Inappropriate

Like in music, the Pacific Northwest business environment had its heyday in 1993 and has been in decline ever since. At best it has tried to mimic and keep pace with the rest of the world, but the concept of Seattle Business Leadership has gone by the wayside. We are in fact a victim of our own success, as everyone from New York City to Fort Collins, Colorado are replicating the mix of high tech, coffee shops and university lifestyles.

By resting on our laurels, we may end up last place in a game of our own creation!

jabailo

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