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Published On: Thu, Nov 8th, 2012

Stock market drops over 300 the day after the election, blame game begins

A stereotypical caricature of a villain (i.e. generic melodrama villain stock character, with handlebar moustache and black top-hat).
NOTE: Although this image superficially resembles the character “Snidely Whiplash” from the Jay Ward Productions “Dudley Do-Right” series of animated films, it is not meant to represent that character and should not be used to illustrate any Jay Ward Productions related articles.

The Dow Jones Industrial Average closed Wednesday down 312.95 points, or nearly 2.4 percent, its worst selloff of the year. It closed below 13,000 for the first time in three months. The Standard & Poor’s 500-stock index also tumbled 2.4 percent, and the tech-heavy Nasdaq composite index fell nearly 2.5 percent.

The Huffington Post is quick to direct attention away from the election, President Obama’s re-election, with this introduction to their coverage.

Well, we hope you are happy with yourself, America: You reelected President Obama and destroyed the stock market.

That’s what a bunch of angry Wall Streeters, who unsuccessfully sunk millions into defeating Obama, would like you to believe, anyway. The truth is a bit more complicated.

Usnews offered these alternative reasons for the drop:

Aggressive purchasing on stocks, betting Mitt Romney would win:

Analyst David Urani of Wall Street Strategies, for instance, pointed out that certain coal, defense and health care stocks rose sharply on Tuesday, probably bid up by investors hoping to cash in on favorable policy changes. Since they guessed wrong, the markets are now reversing those types of trades.

Some investors were distracted by the election:

… once again (investors are) paying attention to important developments elsewhere, such as Europe. And surprise! Greece is once again teetering on the edge of withdrawal from the euro zone and a catastrophic default on its debt. That bogeyman is back.

Fiscal Cliff:

But the biggest concern is the looming “fiscal cliff” that Congress must address by the end of the year, with about $800 billion worth of tax hikes and spending cuts due to go into effect if Congress doesn’t act to prevent those measures from happening all at once. If Congress does nothing, all that austerity could shave GDP by about 4 percent, easily enough to trigger a fresh recession.

Many analysts believed that a Republican sweep on Election Day would have been the best outcome for swerving away from the cliff, since a government united under GOP leadership would be inclined to delay or cancel the scheduled tax hikes, which account for more than 80 percent of the hit to GDP. That may have been true, but it was also wishful thinking, since the GOP gained virtually nothing on Election Day. So investors must continue to grapple with bitterly divided government and all its ugly implications.

 Obama fault? The critics can’t even make that assessment.

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About the Author

- Stephen is a contributor and writer on The Dispatch. Stephen is the founder and editor for the Steven Spielberg Fan Club website and contributes to pop culture stories on The Dispatch, especially upcoming movie news. Beginning in 2016, Stephen took the role of Managing Editor for the Tampa Dispatch.

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