Markets Drop After Obama Reelection: American Investors Panic Causing 2 Percent Drop
Celebration over the President Obama’s victory has turned to panic selling in less than 12 hours as all three major American equity indexes dropped over 2% by noon today.
The re-election of President Obama combined with split governance continued in Congress led to the largest sell off U.S. markets had experienced in months during early trading. The broad based S & P 500 dropped below the 1,400 level mark for the first time since September 4.
Before anyone truly panics, early morning trading having resulted in an over 2% decrease that will generate millions of automatic buy orders which unless cancelled should produce a late day rebound. What only the days to come will tell us is, how fast and how far will America’s equity markets decline due to lack of confidence in our ability to avoid the fiscal cliff.
Without action by Congress, America is looking at a combined $600 billion in tax increases and spending cuts. The fiscal cliff, which the electorate didn’t wish to hear about, has now taken center stage. Neither Democrats nor Republicans believe in our nominal recovery without the combination of ending the Bush era tax cuts while simultaneously implementing the first stages of the schedule sequestered spending reductions.
Further complicating the decisions that the coming “lame duck” Congress must deal with is another increase in the nation’s debt limit. Global Rating Agency’s have warned any increase in the debt ceiling will further lower our credit rating without a long-term deficit reduction program put into place.
Wednesday's early morning sell off could have been, and could still become, much worse. Without congressional action this morning’s 2% drop will be remembered as the beginning of our next major equity reversal after America elected its next round of leaders. Now we will all see if those choices we made were the correct ones.