The day after the inauguration I picked up a copy of the Washington Post. Right on the front page, below the article on our new President, was an article about the performance of the stock market on Inauguration Day (including a handy table of the performance over the last 15 inaugurations). The markets tanked, with the Dow shedding 4% of its value. The Wall Street Journal also ran some commentary noting the connection between Obama’s election and market performance. Is there an important message here? No. There is essentially zero causation between Obama’s installation in the oval office and market performance on the same day. It’s not like stock brokers woke up that Tuesday morning, flipped on their TVs, discovered that Obama was about to become president, and decided to dump their portfolios. Obama’s election has been incorporated into market valuations for months. These articles are tantamount to talking about the weather on inauguration day (brutally cold, I can assure you). Obama had little to do with the miraculous break in the clouds and sunshine that immediately preceded his swearing in. Newspapers are unlikely to devote an article to the weather on 1/20. And they’re certainly not going to put such an article on the front page. So why are the markets so fetishized that their performance is considered front-page “news”, even on a day with plenty of other notable events?
The market drop is indeed relevant, not as a sign of what Obama will do to the financial markets, but rather, what the financial markets will do to Obama. We are in an era of immense volatility and huge losses. In other times a 4% drop would be highly unusual and notable. But, sadly, in the present climate it has become routine. The economic downturn will almost certainly impact essentially every aspect of Obama’s time in office.
As it happens, the weather can also play an important role in the inauguration of a President. It was bitter cold for President William Harrison’s inauguration in 1841. His speech lasted for almost two hours (a record length), with him standing outside with little shelter. He caught pneumonia, and within a month was dead. There was undoubtedly little correlation between the cold and his death. But it makes for a perfect apocryphal story.