How can so many investors be so wrong? Stocks went down after the reelection of Barack Obama. The Obama stock market slump is likely related to depression among those investors who wanted Romney to become president. Interestingly the stock market also fell in response to Obama’s election for a first term. Despite incessant grousing about economic performance under the Obama administration the stock market has recovered and reached new highs. If the past is predictive of the future anyone who invests in the current Obama stock market slump will be amply rewarded as the market proceeds to new highs in the months and years to come. As always, diligent fundamental analysis and timely stock purchases will be rewarded.
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Continuity Matters
Because Obama won the election there will not be a transition period during which governance will be put on hold. The Federal Reserve will likely continue its policy of quantitative easing. This policy has helped United States manufacturing launch a steady three year long recovery. If the Obama stock market slump results in low priced stocks in this sector it might be time to invest in manufacturing stocks in the USA. Under a Romney administration there was likely to be a shakeup of the Federal Reserve and exit of Chairman Bernanke. What the short sighted fail to realize is that the second worst recession in 75 years did not fall into another Great Depression. The world’s acknowledged expert on the causes of the Great Depression is, by most accounts, Ben Bernanke. The monumental stimulus programs, and accompanying increase in debt, helped stave off a deflationary cycle and a worse depression than that of the 1930’s. The continuing stimulus plans paid for in the USA and Europe by printed money are serving to correct the artificially high value of both the US dollar and the Euro. The end result of these programs will be a cheaper dollar and more competitive American and European products. The end result of current Fed policy will be to break the strangle hold that Chinese industry has on North American and European consumers. Despite a temporary Obama stock market slump, continuity matters in governance.
Profiting from an Obama Stock Market Slump
Profits from a post election market slump will depend, obviously, on the depth to which the market falls and the degree and rapidity of economic recovery. Almost lost in the run up to the election was another good economic report with more jobs added to the economy and a sign of optimism in that many more workers are back looking for work. Hurricane Sandy wrecked havoc on the eve of the election but those with an eye for investing when there is blood in the streets will invest in rebuilding the Jersey shore and other areas of the east coast, such as Hoboken and Long Island. Investors will do well to look for overlooked intrinsic stock value and a margin of safety in their stock picks. They will also do well to mimic the actions of day traders in buying their carefully chosen stocks at the precise moment when mistaken market sentiment takes them to rock bottom.
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