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U.S. Stock Markets Subdued Ahead Of U.S. Presidential Election

4 November 2008 - News - Editor

U.S. stock markets were rather subdued on Monday, closing practically flat ahead of Tuesday’s presidential election. The Dow Jones industrial average dropped 5.18 points (0.06 percent) closing at 9,319.83, while the broad-market Standard & Poor’s 500 index fell 2.45 points (0.25 percent) closing at 966.30 and the Nasdaq composite increased 5.38 points (0.31 percent) to close at 1,726.33. In Europe, the London FTSE gained 1.51 percent, the Paris CAC40 rose 1.17 percent and Frankfurt’s DAX rose 0.62 percent.

Reports released on Monday indicate intensifying distress in the U.S. economy, signaling a recession ahead, although there is some debate as to whether the super-power is not already in recession. The U.S. manufacturing sector dropped for the third consecutive month in October and a third-quarter business survey undertaken by the National Association for Business Economics (NABE) revealed that businesses have become far more negative since surveyed in July, suggesting that the financial crisis is negatively impacting the overall economy.

The outcome of the election is anticipated to be a key turning point for the handling of the ongoing global financial crisis and, irrespective of which way the vote goes, everyone is hoping for a clear-cut victory so that attention can be focused on dealing with pressing economic problems. Analysts believe that stock markets will respond positively, at least in the short term, to confirmation of who will be occupying the White House for the next four years, because at least one of the many uncertainties currently being faced will have been removed. However, many believe that post election euphoria is likely to be short lived because the newly elected president will only take office on 20 January and has no powers until then, leaving a two-month gap under the current administration that may very well cause markets to plummet. Also, analysts believe that the winner will most likely need to set aside his political agenda, and the fulfilling of certain campaign promises, in order to deal with what is turning out to be the most serious economic crisis the United States has faced sine the 1930s.

Nevertheless, history has shown that worthwhile buying opportunities do present themselves during times of extreme stress in the market, and many investors see this as a good time to buy high-quality shares which are now on sale. Also, the market has shown in the past that the first year after a presidential election is a good time for U.S. shares as investors respond positively to change. However, no newly elected U.S. president in the past has ever had to deal with quite the same challenges as the upcoming president will be faced with, and the U.S. market is likely to have many more volatile months ahead before stabilizing.

 


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