The Economy's Reaction to Another Obama Term

Before the presidential election many businesses and investors worldwide watched the debates with unease. Depending on who was elected would determine which spending, taxing, and health care policies would be put into place. The two candidates - Democrat, Barack Obama and Republican, Mitt Romney - held vastly different fiscal plans for the nation and businesses and investors were concerned with how each policy would affect them. 

Generally after the conclusion of a presidential election, the stock markets see a jump the next day. This would make sense since an election decision would dispel previous uncertainty. However, I was confused when this article appeared in the Wall Street Journal Wednesday morning after President Obama's re-election: Economic Unease Looms After Election 

The U.S. economy has shown improvements in recent months. Unemployment finally dropped below 8 percent to 7.9 percent (it originally dropped to 7.8 percent but rose again as more people started looking for work), stock prices are up, and the housing market is starting to grow. However, the system is still fragile with many European countries fighting their own recessions. 

U.S. stock futures have fallen and the dollar has weakened since Obama's re-election on Tuesday. Many businesses are concerned about what the new administration plans to do about the "fiscal cliff" - more than $600 billion in tax increases and spending cuts to go into effect in 2013. Businesses believe that if this plan goes into effect it could send our economy into another recession. Many businesses have decided to hold back on capitol spending and hiring plans until a deal is made to disband this fiscal cliff. 

On Tuesday, the Dow Jones Industrial Average jumped 133 points, but after the election concluded the Dow dropped again by 312.95 points, 2.36%. This was the biggest point and percentage decline since November 9, 2011. The decline is directly correlated with concern over the fiscal cliff. Hopefully, congress will be able to set aside their differences soon in order to come up with a solution to avoid another market meltdown.