Over or Under - Obama and the Dow

[Habib]

Since the creation of the Dow Jones Index in 1884, the index has never dropped as sharply on the day of a president's inauguration as it did yesterday.

 

How is that even tangentially related to my post?

[Hoot Gibson]

How is that even tangentially related to my post?

After re-reading the posts, I see that isn't related at all, so just consider my comment as additional trivia concerning the Dow, FWIW. :idunno::isurrender:

 

(My misguided response did give me a reason to use two of the new smilies.)

[mcpapa]

What does the above tell us? Anything?

 

What it tells me is that the Dow tends to rise slightly on the second inauguration day of two-term Presidents. Most of the time, anyway.

 

I belive what you were asking is if IDD (Inauguration Day Dow) correlates with the economy during the subsequent 364, give or take, days of a President's term. I'm not an economist, so I can't tell you.

[H]

Yes, and the Inauguration Day return has been such a reliable predictor of Dow Jones performance over the term of the inaugurated President.

 

I took Hoot's chart one step further and added the average annual return of the DJIA during each Presidential term:

 

Nixon 1973-1974, Inauguration Day Change: -0.72%, Avg Annual DJIA Return: -15.6%

Ford 1974-1977, Inauguration Day Change: -0.97%, Avg Annual DJIA Return: 9.5%

Carter 1977-1981, Inauguration Day Change: -1%, Avg Annual DJIA Return: -0.2%

Reagan 1981-1985, Inauguration Day Change: -2.09%, Avg Annual DJIA Return: 7.3%

Reagan 1985-1989, Inauguration Day Change: +2.77%, Avg Annual DJIA Return: 20.5%

G Bush 1989-1993, Inauguration Day Change: -0.17%, Avg Annual DJIA Return: 11.3%

Clinton 1993-1997, Inauguration Day Change: -0.43%, Avg Annual DJIA Return: 27.8%

Clinton 1997-2001, Inauguration Day Change: +0.16%, Avg Annual DJIA Return: 13.7%

Bush 2001-2005, Inauguration Day Change: -0.09%, Avg Annual DJIA Return: -0.3%

Bush 2005-2009, Inauguration Day Change: -0.65%, Avg Annual DJIA Return: -5.2%

 

Looks like that first day return does a pretty poor job of predicting the performance of the market over the next four years. Gee, what a surprise. :idunno:

[Hoot Gibson]

Yes, and the Inauguration Day return has been such a reliable predictor of Dow Jones performance over the term of the inaugurated President.

 

I took Hoot's chart one step further and added the average annual return of the DJIA during each Presidential term:

 

Nixon 1973-1974, Inauguration Day Change: -0.72%, Avg Annual DJIA Return: -15.6%

Ford 1974-1977, Inauguration Day Change: -0.97%, Avg Annual DJIA Return: 9.5%

Carter 1977-1981, Inauguration Day Change: -1%, Avg Annual DJIA Return: -0.2%

Reagan 1981-1985, Inauguration Day Change: -2.09%, Avg Annual DJIA Return: 7.3%

Reagan 1985-1989, Inauguration Day Change: +2.77%, Avg Annual DJIA Return: 20.5%

G Bush 1989-1993, Inauguration Day Change: -0.17%, Avg Annual DJIA Return: 11.3%

Clinton 1993-1997, Inauguration Day Change: -0.43%, Avg Annual DJIA Return: 27.8%

Clinton 1997-2001, Inauguration Day Change: +0.16%, Avg Annual DJIA Return: 13.7%

Bush 2001-2005, Inauguration Day Change: -0.09%, Avg Annual DJIA Return: -0.3%

Bush 2005-2009, Inauguration Day Change: -0.65%, Avg Annual DJIA Return: -5.2%

 

Looks like that first day return does a pretty poor job of predicting the performance of the market over the next four years. Gee, what a surprise. :idunno:

No surprise at all. I never made any claim that the numbers had any bearing on the next four years of economic performance. What the numbers may reflect however, is the pessimism on Wall Street that a change in presidents will have any positive impact on the economy. It may simply be a coincidence that the market plunged more on the day that Obama took the oath of office than it had in any previous inauguration day - or it may not be a coincidence.

 

Great illustration of creating a straw man and then knocking him down, BTW. :lol:

Edited January 22, 2009 by Hoot Gibson

[mcpapa]

Dow up 279 on the DAI (Day After Inauguration). What does it mean? Who knows?

[75center]

Dow up 279 on the DAI (Day After Inauguration). What does it mean? Who knows?

 

Means the day traders are having fun again.

[cch5432]

Means the day traders are having fun again.

 

While incredibly risky, I've always thought that being a day trader would be an incredibly exciting profession.

[H]

No surprise at all. I never made any claim that the numbers had any bearing on the next four years of economic performance. What the numbers may reflect however, is the pessimism on Wall Street that a change in presidents will have any positive impact on the economy. It may simply be a coincidence that the market plunged more on the day that Obama took the oath of office than it had in any previous inauguration day - or it may not be a coincidence.

 

Great illustration of creating a straw man and then knocking him down, BTW. :lol:

 

 

And we see how that pessimism/optimism of the market on inauguration day has correlated with actual economic performance. My response is: Who cares what Wall Street thinks on inauguration day?! This 'measure' has been wrong more than it's been right! Besides, with the level of market volatility we have seen since September, I'm not so sure a 4% movement either up or down means much of anything.