## Friday, November 07, 2008

### Market reaction to Barack Obama

On 3rd November, the S&P 500 closed at 965. Now it's at 912.

On 3rd November, the VIX closed at 55. I would have normally expected that the outcome of the US presidential election should yield a reduction in uncertainty. But the VIX is now at 64.

A coincidence? I am reminded of the article in the Financial Times by John Tamny and Rob Arnott, that I had blogged about on 4th November, which pointed out that the market is pretty uncomfortable with an Obama presidency which might shape up as a left-of-centre administration.

The market is doing well, as always, in being a canary in the coal mine. The 5% decline in the S&P 500, and the 9 point rise in the VIX, would exert pressure on Obama's staffing decisions. We're perhaps more likely to get well respected names such as Larry Summers in economic policy roles as a consequence. I am reminded of 17 May 2004, where the stock market registered a massive vote of no confidence in the UPA. I feel this helped increase the quality of Sonia Gandhi's decisions on putting together her cabinet.

Please note: LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.