Stocks tumble after election

Sharp selloff brings Obama back to earth after re-election

Published On: Nov 07 2012 07:45:12 PM EST
DETROIT -

From the high of winning a second presidential term, to the lowest numbers on Wall Street in recent months. Investors gave President Obama a stark reminder of the challenges he still faces, with the sharpest selloff of the year. Frantic selling recalled the days after Obama's first victory, as the financial crisis raged and stocks spiraled downward.

Macomb wealth management consultant Tom Hakim says it’s not unusual to see a post-election sell off.

"People speculate, so people speculated in areas Mr. Romney may have been strong in-- energy, banking, health care. So, when you speculate and it doesn't work out- what do you do? you leave- and that's what happened this morning," he said.

World Economy, Gridlock Make Things Worse

While it's normal for investors to shift gears after an election, Hakim sees a difference this year. "I think it had a bigger impact because of what's still going on in Europe- and the fact there's still going to be gridlock and the confidence level that there's going to be some kind of peace. It's not there yet," Hakim said after the market closed.

The Dow Jones industrial average plummeted as much as 369 points, or 2.8 percent, in the first two hours of trading. It recovered steadily in the afternoon, but slid into the close and ended down 313, its biggest point drop since this time last year.

As jitters about the election subsided, traders confronted an ugly reality: The so-called fiscal cliff, which will impose automatic tax increases and deep cuts to government spending at the end of the year unless the
president and Congress reach a deal.

That's no easy task for a deadlocked government whose overall composition has barely changed: a Democratic president and Senate and a Republican House.

If Congress and the White House don't reach a deal, the spending cuts and tax increases could total $800 billion next year. Some economists say that could push the economy back into recession.

"Obama's re-election does not change the bigger economic or fiscal picture," Paul Ashworth of Capital Economics, an economic research company, said in a note to clients.

If you're sitting at home, worried about your stocks or your 401k, Hakim says you don't need to panic or make dramatic changes.

"Stay safe, stay sound and follow your conscious. If you want to gamble, I suggest you go somewhere like Las Vegas, at least the shows are good."