Has The Barack Obama Presidency Been Driven By Market Dynamics?

It has been my belief that today's market response in the US had been the classic “sell on news” following the victory of Sen. Barack Obama in the 2008 Presidential elections.

Why? Because as we earlier argued in US Presidential Elections: The Realisms of Proposed “Changes”, American voters appears to have been influenced by the market’s reaction than of markets responding to the election dynamics.

Here is what we wrote, ``The worsening bear market in stocks and real estate which seems reflective of the prevailing economic conditions appears to be a key driving force which have driven the US public into the open arms of the opposition. Also, the rash of the present bailout schemes appears to be feverishly fueling the “bailout culture” from which has boosted the opposition’s welfare based platform.”

Proof?

The following compares the election trends vis-à-vis the US S&P 500 benchmark.

Courtesy of intrade.com

The Intrade Prediction markets exhibits the following data:

1) Democratic candidate Sen. Barack Obama led significantly most of the time (blue line) since the second quarter of 2008.

2) Republican candidate John McCain (red line) grabbed the lead for a short period during mid August-mid September (pink circle). Incidentally this was the period where candidate John McCain (red line) surprisingly picked Alaska Governor Sarah Palin as running mate.

3) Senator Obama reclaimed the lead only in late September, incidentally a week after the Lehman Bros filed for bankruptcy.

4) The Obama lead invariably widened as the November elections culminated.

Then take a look at how the S&P behaved during the shifts.

courtesy of stockcharts.com

Our interpretation:

-As you would notice, the undecided American voting public has seemingly been swayed by the market’s collapse to join the bandwagon for an Obama election landslide.

-The market’s collapse seems to have spelled the crucial difference that catapulted Senator Obama to the Presidency. Put differently, market’s woes have extrapolated to Sen. Obama’s gains.

-Americans seemed to have rallied or gravitated towards Obama in order to seek some form of relief from the market’s meltdown. In short, the Americans have assumed the Obama Presidency as some sort of a “savior” or have digested the “change” theme as some sort of economic or financial placebo.

Henry David Thoreau once said that ``What is called resignation is confirmed desperation.”

We just hope that desperation do not translate to illusion this time around.

Congratulations to US President Elect Barack Obama.