Street Calls of the Week
The markets are flushing dramatically today. The Dow, S&P 500 and NASDAQ are all down 2.3% on the day. The SPDR S&P 500 ETF Trust (SPY) is trading at $139.80, -3.13 (-2.19%). The Dow Jones Industrial Average is having its biggest point decline in almost a year. All this coming on the day following the Presidential Elections where President Obama won a second term.
So why are the markets getting crushed? After all, polls favored Obama to win. This shouldn't be a huge shock to Wall Street.
Wall Street's Warning Shot
There are multiple factors. First, Wall Street is sending a harsh signal to the President. Ultimately, taxing the rich is on the table and likely to happen. In addition, short term capital gains and taxes on dividends are likely to go higher. This is a 'shot across the bow' from Wall Street, flexing its muscle and warning the President.
In addition, there is no longer an election to distract Wall Street from the Fiscal Cliff that lies right in front of America. The President has not been a friend to the Republicans and there is a major fear that no agreement on handling the Fiscal Cliff will be reached. This could cause a major market decline and a recession. Investors are running for cover on this fear.
Draghi Speaks
Next, Europe seemed to be under a secret gag order into the elections. Did you notice how almost nothing emerged from Europe over the last few months? It's not a coincidence that ECB-chief Draghi emerged today and gave the world a reality check on how bad Europe is doing.
Lastly, Obama no longer has a need to keep a pretty image. He does not need the stock market to head higher so he can be re elected again. At this stage, less will be done to prop the markets up going forward.
Fasten Your Seatbelts
This is going to be a wild time for the markets. There will be major ups and downs and swing traders will profit the most. As usual, long term investors will lose the most.
Related: SPDR Dow Jones Industrial Average ETF (DIA), PowerShares QQQ Trust, Series 1 (ETF) (QQQ), International Business Machines Corp. (IBM), Apple Inc. (AAPL).
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