The Invisible Magic Wand

There is very legitimate debate about the President’s influence over the economy, often growing in intensity as political expediency dictates. One thing that probably should be agreed upon however is that President-elects don’t in and of themselves have a magical power to influence the stock market, especially when it’s far more plausible the market has reacted to some of the worst economic news in an environment already full of bad economic news. Apparently Fox News doesn’t agree.

Indeed, ossilations in the stock market result from people buying and selling stocks. If the market reacts, several months ahead of time, to the expectation that Obama will “raise the capital gains tax” (as Dick Morris suggests), it’s because traders decided to do so of their own volition. Furthermore, if investors were reacting to a speculative hike in the capital gains tax (presumably devaluing the stock market investment), you might expect for the money to be taken out of the market to be put in more remunerative investments, but this wasn’t the case. Instead, mass sell offs in the market happen because investors expect continued market decline, not because the profits to be gleaned from investment have been marginally reduced.

Meanwhile, for a primer on financial journalism, which is essentially Mad Libs with a limited word pool, head here.


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