How Come There’s No Bush Rally?

Many attempts were made, both before Election Day and in the month-plus of uncertainty that followed it, to divine the stock markets’ judgment of the presidential contest. Two popular observations were: 1) that the stock market wanted this thing settled and 2) that, more specifically, traders wanted Bush.

And so there’s been some puzzlement about the conspicuous lack of a Bush rally on Wall Street. The Dow surged briefly Wednesday morning, following the Supreme Court decision that effectively ended all uncertainty, but this proved fleeting and all the indexes posted a lackluster close. This morning, after the finality of last night’s speeches by both candidates, stocks are generally off.

The obvious reason for this is that company profits and the economy have a far greater effect on share prices. But this election season (and postelection season) happen to have included a number of attempts to put a political spin on the market’s gyrations–a presumably potent tactic given the we-are-all-shareholders-now temper of the times. So it’s worth noting just how questionable this line of spin really is.

In the latter half of September, for example, some pro-Bush pundits dismissed other factors that might have been causing stocks to have a lousy month and argued that the markets were simply bummed out at Al Gore’s then-robust poll numbers. On Sept. 20–when the markets-fear-Gore line of argument hit a peak–the Nasdaq closed near 3,900. The Dow, at about 10,690. The S&P 500 at roughly 1,450.

And yet, as I write this on day one of the absolutely, unequivocally, beyond dispute here-comes-Bush era, Nasdaq is 30 percent lower than its Sept. 20 level at a little below 2,800, the Dow is essentially even at 10,680, and the S&P is down 7 percent at 1,350 or so.

This morning’s official explanation for the lack of a Bush rally is that the markets had already “priced in” the good news of election finality. There may be some truth to this in the very short term–the Nasdaq, Dow, and S&P are all trading above their worst intraday lows of the chad-haggling period–but it fails to satisfy if you have a memory that goes back more than a few weeks. Specifically, if the markets wanted Bush, why would they “price” the fact of his victory lower than the September possibility of his defeat?

Now, am I unfairly leaving out all kinds of intervening economic and earnings news? Of course I am! But that’s because I’m playing by the same rules as those who said the markets were cheering for Bush. One of the things that was supposed to happen in this election was that a broader group of voters would factor their portfolios into the political decision-making. Whether that actually occurred or not, the presumption that it would meant that market performance became something else to spin in an attempt to score political points. And in this arena as elsewhere, there’s a gap between spin and reality.

Photograph of traders at the Chicago Mercantile Exchange on theSlateTable of Contents by Scott Olson/Reuters.