I entirely agree with (in terms of history supporting) CNN Money‘s Allan Sloan’s assertion that the stock market, over the course of a term in office, goes largely un-directly-affected by the man who occupies the President’s chair. During the few weeks and months surrounding the election, however, traders may indeed transact in one direction or the other based on the leading, then elected, candidate’s stated positions on taxes, regs, stimulus, etc.. I.e., in the very short-term, one could argue that election results do impact the stock market.
Where I entirely disagree with Mr. Sloan is his statement that “things stabilized” during the first months of President Obama’s term “because of coordinated actions by central banks and governments throughout the world.” As if to imply that, without intervention, markets would not clear and “things” wouldn’t stabilize on their own. I would in fact argue that markets don’t clear, or, at a minimum, take longer to clear because of the “coordinated actions” of those who I view to be grossly uncoordinated actors.
Like I said in That’s It! Peanut Butter Cups!
“Never mind the distortions caused by programs like Cash for Clunkers and the Home-buyer Tax Credit—two (among others) that proved to be very costly—while delivering virtually nothing but a brief sugar high followed by renewed, accelerated even, declines in both sectors. Never mind that we’ve added trillions in public debt while the needle barely budged. Never mind that the Fed has bloated its balance sheet to the trillions—purchased assets [with newly created money] to inject liquidity into the system—and headline unemployment remains north of 8%.”
Or, better yet, as Pierre-Daniel Huet said in A Philosophical Treatise Concerning the Weakness of Human Understanding (1934):
“Although we know nothing, we nevertheless deceive ourselves, by giving ourselves up to our own pride, which easily persuades us that we have attained to knowledge; and that weakness and ignorance is so much the more to be pitied; that though it may sometimes happen that we speak the truth, yet we cannot be sure whether we do or do not.”