I just read another article this morning about the recent selloff on Wall Street.  It was the second analysis that I have read in the past two days that concludes that Mr. Obama’s lead in the polls is an important factor in the panic.

Both articles clearly indicate that there is a financial crisis based on a combination of very bad government credit policy, greedy institutions, and clueless borrowers.  The extension of the crisis to the economy is based mostly on the tightening of credit and a lack of investor confidence (read – fear of the future). The  the articles say that the fall in stock prices to levels not seen in many years is largely due to politics. Markets move in anticipation of future events.  For example, if it looks like a hurricane will shut down oil production in the Gulf for five days, the market will discount the stocks that will be affected by the loss of production.  These two authors conclude that a large portion of the recent selloff is due to the market discounting the negative affect of a Democrat controlled Congress and Mr. Obama as President.

“Just how low can the markets and economy go?   It could be a lot lower – it all depends on the policies of the next president.   And, as it looks increasingly likely that Obama will be that man, the markets are casting a vote of “no confidence.”” (Charles Gasparino, CNBC, Oct. 13, 2008)

Since Small Business is the engine that drives employment, policies negative to Small Business will drive unemployment. Large unemployment will kill consumer spending and keep the downward spiral going.  Mr. Obama’s plan to tax the rich is aimed squarely at Small Business since large numbers of small businesses are SubChapter “S” corporations or LLCs whose profits/losses pass through to the owners.  The recognition of this fact is not lost on Wall Street even if it seems to be on Mr. Obama’s economic advisors.

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