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The Berkshires

Why the stocks fell after the election

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Albany/HV: Why the stocks fell after the election
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Wall Street looked to rebound Wednesday after suffering its worst day of the year on Tuesday. The Dow finished down 312 points. It's the fourth time ever it's been down the day after the general election. But how do we explain the market's fall? Our Erin Vannella reports.

NATIONWIDE -- The president is elected and the Dow Jones drops more than two percent to one of its worst sell-off's of the year. Why?

"I think it had more to do with the disappointment that Romney was not elected than anything else," said Financial Analyst Hugh Johnson.

Johnson blames in part, a lack of confidence among some Republicans that Obama can strengthen the economy. He won with the highest unemployment rate of any president since Franklin Delano Roosevelt.

"If Romney was elected, the belief was we'd start to get things done in Washington," said Johnson.

On the other hand Johnson explains some analysts are relieved a re-election could incite fewer policy changes or higher interest rates. There's also Europe to consider.

"Europe is an important export destination for us companies. We sell a lot of things to Europe and if the european economy is not recovering that means a lot of U.S. companies are not going to do well," said Johnson.

Perhaps most unsettling of all is the "fiscal cliff".

"At the end of this year you have automatic spending reductions by the federal government, tax increases by the federal government. The congressional office has told us we've got to avert that or the us economy could be headed toward a recession. Investors say they're not so sure and that's why they sold a lot of stocks," said Johnson.

He also said negotiating that "fiscal cliff" will be integral to achieving financial stability, riding the line between raising taxes and cutting spending. However, if history can console in the near term, the Dow collapsed 468 points on the day after Obama's election in 2008 and almost doubled in value in his next four years. ClientIP:, UserAgent: CCBot/2.0 ( Profile: TWCSAMLSP