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"World Congratulations" Cause Five Percent Stock Plunge
"Lucy! You got some 'splainin' to do!"

By Robert Folsom
Tue, 20 Jan 2009 17:45:00 ET
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If "news drives markets," it stands to reason that market prices rise on "good" news and fall on "bad" news. It also stands to reason that Tuesday – more so than any day in living memory – Tuesday should have seen a stock market rally that made a sonic boom as it left the atmosphere.
 
The top story on Google News was CNN's "World congratulates Obama on taking office," with a link below that story listing 5,992 similar stories. Point being, it's not simply that the U.S. media offered wall-to-wall coverage of the U.S. Presidential Inauguration. This was a party and the whole world wanted to join in. If they were within earshot of a radio or television, people in the most miserably poor domiciles on the planet know that Barack Obama became president today.
 
So, Good News covered the earth...
 
... And stock markets plummeted. The S&P 500 lost 45 points, in a 5.3% decline.
 
For anyone who insists on standing by the news drives markets story, I quote Ricky Ricardo:
 
"Lucy! You got some 'splainin' to do!"
 
Please don't get me wrong. If you want to talk politics, then today's news really is good. I do believe this President's inauguration is historic. I want Obama to do well and I wish him nothing but the best.
 
But getting back to the financial markets...
 
...News does not drive market trends. It does not create market trends. It does not turn market trends. If I missed a word regarding what news doesn't do to market trends, well, it doesn't do that either.
 
What does drive market trends? Good question -- and we can answer it. We can also show you where today's trend is within the larger pattern, complete with charts and a forecast of where we believe it will go from here. Have it all (and more) on your computer screen in minutes: begin by clicking here.

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