What Happens to the Stock Market if Obama Becomes the CEO of America?

What Happens to the Stock Market if Obama Becomes the CEO of America?
Photo: iceman9294, Creative Commons, Flickr

It’s easy and counterproductive to politicize the stock market: Democrats would say the it’s plunging due to eight years of Republican leadership. Republicans would counter that the free-falling stock market is pricing in a Democrat in the White House.

Research based on the past 80 years shows that American stock markets have performed better under Democrats, but the Republicans would correctly point out that the result is distorted due to the Internet revolution that took place during the Clinton administration.

The first lesson in statistics: Correlation does not necessarily imply causation. Usually, it would be incorrect to assume that a Democratic or Republican administration would push the stock market in a certain direction. But this time it’s different.

I’ll be the first to admit that it is pointless to predict the long-term outlook for the stock market, but I believe we are in for a strong bull market if Obama becomes president. Do I think that he is the answer to all of our problems? Most definitely, no. I don’t want to put Obama on a pedestal, but I’m feeling bullish as an investor due to the underlying trends that are fueling his success. The same forces that are engineering an Obama victory will repair the American economy.

I am a South African working in the United States and I will probably apply for citizenship if Obama is elected. It’s not because I want to live in a country with Obama at the helm. It’s because I want to live in a country that can go from the tyranny of George Walker Bush to the promise of Barack Hussein Obama in the space of eight years. It’s because I want to live in a country where people can admit that something is wrong and fix it. It’s because I want to live in a country where people believe in real change.

These are the bullish forces that will shape the outlook for the stock market. Think of a struggling public company: if the CEO is removed by the board, the stock price tends to shoot higher because investors reward companies that own up to their problems and fix them.

America depends on foreigners to fund its trade deficit, and these foreigners continue to do so because they still hunger for the “idea of America” – an open, optimistic, and revolutionary economy that can provide a solid return on investment. The mere nomination of Obama has greatly improved America’s image abroad, and may well inspire foreigners to continue to finance the American trade deficit until it is balanced.

Ralph Waldo Emerson told a meeting of the Mercantile Library Association in 1844 that “America is the country of the future. It is a country of beginnings, of projects, of vast designs and expectations.” It has been a lost decade for U.S. stocks because Bush destroyed that America. I’ll be betting on a reversal when Obama is given the opportunity to rebuild the American dream.