Markets Sell First, Read Later
NEW YORK, New York — America's financial markets have answered Democratic election victories by showing off the remarkable ability of Wall Street professionals to panic about an event they spent six months predicting.
US Stocks and Dollar Slide as Midterm Results Point to Democratic Congress
Stocks and the dollar slid as midterm results raised the prospect of Democratic control of Congress. Traders, hedge fund managers and financial commentators sold investments, bought anxiety and explained that democracy had again added unacceptable uncertainty to the economy. The American public had committed the unforgivable offence of voting without first consulting institutional investors.
"Markets love certainty," said one Wall Street strategist. "We want predictable tax rates, predictable regulations and predictable government spending. Unfortunately, elections sometimes involve ordinary people making decisions."
He suggested democracy might run more efficiently if voters had to get written approval from Goldman Sachs before entering a polling station. The proposal drew enthusiastic support from several people who already regard the quarterly earnings report as the highest form of constitutional government.
Selling Everything Before Understanding Anything
Democrats celebrated the results as proof that Americans want economic fairness, better affordability and a more accountable government. Investors read the same results as a possible warning that profitable businesses might eventually be asked to chip in more. That set off the familiar Wall Street ritual known as Selling Everything Before Understanding Anything.
Some of the worries may prove justified. Others concern legislation that hasn't been introduced, debated, passed or signed. The industry nonetheless maintains that losing money over imagined future events is sophisticated risk management.
"If Democrats raise corporate taxes, profits could fall," explained a portfolio manager. "So we're selling shares today because tomorrow somebody might propose something Congress might eventually consider." Asked whether that was rational, he said rationality was a long-term investment strategy. Short-term trading requires caffeine.
A trading desk transcript, shared with this publication, captures the mood at the open. "Are we selling?" "Yes." "What are we selling?" "Everything." "Why?" "I'll tell you when I've finished selling."
According to figures compiled by a brokerage firm, television commentators used the word "uncertainty" 1,140 times in the first hour of trading. The word "voters" appeared nine times, most of them in the phrase "those voters."
Ordinary Americans Respond to the Market Panic
Ordinary Americans found the whole thing confusing. A warehouse worker in Ohio said he voted because groceries, housing and medical bills had all become more expensive. "Now television says investors are upset because the people I voted for might try to change something. Apparently the stock market wants the economy fixed, provided nobody touches the economy."
Technology investors voiced particular concern about the chance of more regulation. Silicon Valley executives warned that heavy oversight could discourage innovation, though several continue pouring huge sums into artificial intelligence systems built to automate jobs held by people who pay taxes.
Economists cautioned that daily market moves reflect many forces, among them interest rates, earnings expectations and international developments. Financial television rejected that tedious complexity and went looking for a single politician to blame for every falling number. By lunchtime one commentator had blamed Democrats for declining technology shares, weaker consumer confidence and an unusually disappointing sandwich.
Republican politicians called the weakness proof that Democratic economic policies are dangerous. Democrats said financial markets sometimes need to tell the difference between economic prosperity and ever-growing billionaire wealth. Both parties promised to protect American workers. Neither explained why protecting workers always seems to begin with an emergency meeting with investment bankers.
The Federal Reserve declined to comment on the sandwich.
By the closing bell, traders were still unsure about the future. Markets might recover. Markets might decline. Congress might pass legislation. Congress might spend two years arguing about the cafeteria menu. The only dependable economic indicator was that financial experts would go on charging large fees to explain events they failed to anticipate.
And somewhere in America an ordinary voter learned that the price of democracy includes listening to billionaires complain whenever the electorate declines to follow their investment advice.
Five Observations on Wall Street and the Midterms
- They sold everything and they'll tell you why when they've finished selling. That's also how my brother-in-law handles the garage.
- Written approval from Goldman Sachs before you can vote. Great. And what do they charge for the pen?
- "Uncertainty" a thousand times, "voters" nine times. That's a man who got dumped and blames the weather.
- The disappointing sandwich was a Democrat. Of course it was. The lunch is always the first thing they get.
- Two years arguing about the cafeteria menu. That's Congress. And they still can't agree on the soup. https://prat.uk/?p=54905
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