Posts Tagged ‘stock markets’

Dow Jones up 500 Points on News that the Yankees have Acquired Nick Swisher

November 14, 2008

Well, perhaps that had nothing to do with it. I find it very difficult to say with any certainty why the market behaves as it does over a short period of time. This puts me in the minority. The WSJ, for instance, recently ran an editorial laying out a theory already popular with many of our friends at the Corner:

No President-elect in the postwar era has been greeted with a more audible hiss from Wall Street. The Dow has lost 1,342 points, or about 14%, since the election, with the S&P 500 and Nasdaq hitting similar skids. The Dow fell another 4.7% yesterday.

But there’s little doubt that uncertainty, and some fear, over Barack Obama’s economic agenda is also contributing to the downdraft.

Little doubt? Jonathan Chait seems to have quite a lot of doubt, gloating as the Dow soared today. No doubt Chait is largely joking, but there have certainly been plenty of lefties giving Obama credit for every silver lining they can find in the dark economic clouds, while sub-prime morgages are rapidly being reduced to a minor contributing factor in the conservative account of the financial crisis Obama has brought down on all of our heads.

These bits of market analysis are absurd, but no more so than what we hear about the markets every day of the year. People are up in arms over attributing market gains or losses to Obama beacuse a new president-elect is something about which people get up in arms, not because those attributions are any less grounded than usual. Headlines following the same formula as the one above this post are a regular feature of the daily news. But the idea that the day’s trading can usefully be explained as the effect of a simply stated cause immediately obvious to reporters is ludicrous. It’s probably true that, from time to time, some easily observed event occurs whose effect on the market is sufficiently dramatic to make all other factors relatively uninteresting in accounting for market movement over a very short period, but, for the most part, media outlets are simply looking at whether the markets did well or poorly, then running with the most recent news event that seems most conducive to that outcome, and voila. There may be some utility to this sort of analysis, but the ubiquitous practice of presenting it as fact (in headlines!) is unfortunate.