Why Did The Market Flush?

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 (NYSEARCA: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 is not a huge shock to Wall Street.

There are multiple factors here. 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 their 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.

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 is not a coincidence that Draghi, the head of the ECB 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.

About Gareth Soloway 168 Articles

Affiliation: InTheMoneyStocks.com

Gareth Soloway has been an avid swing and day trader since his days at Binghamton University where he studied Economics. After college, Gareth quickly excelled as a financial advisor, helping clients get their financial houses in order. While helping others gain financial independence, he continued to study the day trading and swing trading world, developing a unique market philosophy and proprietary methods. Following his work in the financial sector, Gareth went on to trade alongside professional traders. Unable to tolerate the hype of Wall Street any longer and having an amazing ability to profit using his developed techniques, Gareth Soloway decided to partner with his friend and colleague, Nicholas Santiago to form InTheMoneyStocks.com. Chief Market Strategist Gareth Soloway serves as the president and CFO of InTheMoneyStocks.Com.

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