That was quick

Yesterday both Democrats and Republicans alike were savoring the fruits of democracy. I knew this election was going to be different when a close family friend who used to work for the ultra conservative Heritage Foundation confided to me that he not only planned to vote for Barack Obama, he had also given money to the campaign. And so, for the first time ever, the United States will have a black president.

That was all well and good until the stock market opened at 9:30 and suddenly, the post-election afterglow faded quickly. That sure was quick! After enjoying a strong Election Day rally, stocks gave back the previous day’s gains and then some. With the results of the election set in stone, investors were reminded that the economy is still in a precarious state. Data indicated that the service sector contracted and a weekly employment report portended at least a 200,000 job loss when Friday’s employment report is released.

The damage was broad-based: the Dow Jones Industrial Average, which had spiked 305 points on Election Day, fell 486.01 points, or 5.1%, to 9139.27. It was the biggest one-day loss for blue chips since Oct. 22, the twelfth worst point loss in history and the lowest close since Oct. 29. The S&P 500 fell 5.3% to 952.77, led down by the financial sector, which fell 9.2%. The Nasdaq Composite Index snapped a six-day winning streak, finishing down 5.5%, at 1681.64.

Of course we all knew that one day, one election, even a historic one, could not change what we know: the globe continues to be plagued by deleveraging and a widespread economic slowdown driven by lower consumption, investment and trade flows. Investors continue to wrestle with the right prices for stocks amid what could be the most significant recession since the early 1980’s. The depth and length of the recession will determine fair value, but of course it will only be known in retrospect.

For that reason, it is imperative for investors not to get too caught up in either the high-highs or the low-lows over the next few weeks or even months. This is going to take some time to work out and you might drive yourself crazy if you get sucked into the daily movements. If you do sucked in, remember that any extreme feeling is likely to fade when the next day starts…and you just might find yourself thinking, “Gee, that sure was quick…”