Elections and Equities

September 15, 2008

Republican John McCain narrowly leads Democrat Barack Obama in the post-convention polls, and conventional wisdom suggests that the leader in mid-September usually emerges with the win in November.  In the last two times that a new party was voted into the White House, 1992 and 2000,  the Dow Jones Industrial average closed lower on Election Day than its level just before the Labor Day holiday, but those drops were small at 0.9% and 2.6%, respectively.  Already this year, the DJIA is trading 5.4% below its close on August 29th.  If there is no additional erosion, the sharp loss today and up to this point will probably be lost in voters’ minds.  But if asset liquidations persist, a sense that the economy is way out of kilter will deepen and could become an important element in how fence-sitting voters decide.  A decline below 10,000 for the first time since August 2004 could have a particularly damaging impact on psychology.



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