The stock markets are tanking this morning ... because President Obama won reelection? So when an event that had something like 65%-80% probability actually happens, the markets go crazy? I understand that 65%-80% probability is not the same as certainty, but I am surprised by the size of the movements.
According to the WSJ, the markets are turning their attention to the fiscal cliff, but we have been talking about the fiscal cliff for a long time. Perhaps traders were surprised that the House of Representatives remained in Republican hands? Actually, according to Intrade, that was even more likely than the President's reelection, somewhere around 90%.
Then there was this revelation: "Financial stocks were also sharply lower, as investors fretted about the impact of electoral wins by Elizabeth Warren in Massachusetts and Alan Grayson in Florida." The Warren-Brown race was close at the polls, but Warren's election was trading at over 80% on Intrade in the days before the election, and Grayson won by 25 percentage points!
Triumph of hope over experience?
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