So, apparently the stock market took a little plunge yesterday to levels not seen since, wait for it, (gasp!), August. Of this year. I saw a lot of people blaming this on the election the day before. For those of you who don’t know, President Barack Obama won re-election that day.
So, what we have is a political event that took place a day before a dip in stock prices. Some folks want to attribute that drop to the lack of confidence in American companies because of who our president is. That’s fine, even if it is dubious, based on the small sample size and the logical progression I’m about to follow.
Stock prices are based on, essentially, how individual investors feel about a company. If you like the direction a company is moving, you buy it and the value goes up. If you sell that stock, you’re contributing to the devaluation of that company. That’s why they call a bad day on the market a “selloff.” Individuals don’t have much control, but large aggregates of people doing the same thing has a big effect.
If the fact that Obama was re-elected caused a major selloff in stocks the next day, one could conclude that a whole bunch of American investors feel that his presidency is bad for business. Why? Because his presidency will cause stock prices to decline, that’s why. But stock prices decline because companies lose value in the form of people confident enough to invest in them. So selling a stock proves the very point that was making you lose confidence in American companies.
So, on a pretty basic level, we’ve established that the very people worried about stock prices declining are the ones who ultimately led to their decline. I made a joke to someone who was implying that Obama was bad for America because of the stock decline that I wondered if it was somehow rigged to only include stock held by Romney voters. He responded that only Romney voters own stocks, or something to that effect. I’ll grant him that. Of all the stock owners in America, all of them voted Romney. Fair point, and obviously true.
But that leads me to ask, if only Romney voters own stocks, and they’re now responsible for the decline in the Dow Jones average, and they’re smart enough to understand where stock values come from, then why do Romney voters hate American Companies?