MARKET SNAPSHOT: Obama Inherits Battered Market; Dow Dips Below 8,000
January 20 2009 - 3:04PM
Dow Jones News
By Kate Gibson
A sharp-sell off on Wall Street Tuesday highlighted the
challenges facing the new administration of President Barack Obama,
who is inheriting a stock market that collapsed during predecessor
George W. Bush's second term, according to a leading market
tracker.
Bush's final week as president left the Dow Jones Wilshire 5000
Index -- as of Friday's close -- down 5.5% on an annualized basis
during his second term. In combination with the 1% gain eked out
during his first four years, Bush leaves office with the stock
market down 2.3%, annualized, over eight years.
The devaluation of the stock gauge gives Bush the dubious
distinction of being the first president of the past five to
oversee any decline at all, according to Wilshire Associates.
The market's downward trend persisted Tuesday, with the Dow
Jones Industrial Average (DJI) falling 286.33 points, or 3.5%, to
stand at 7,995.77.
Financials were the heaviest weights on the blue-chip index.
Shares of Bank of America Corp. (BAC) dropped more than 25%, while
Citigroup Inc. (C) plummeted 18%.
The broader S&P 500 Index (SPX) declined 38.28 points, or
4.5%, to 811.84, with financials again the greatest laggard, led by
State Street Corp. (STT) off 57%, PNC Financial Services Group
(PNC) off 40%, and Bank of New York Mellon Corp. (BK) off 16%.
Shares of State Street dived on worries that the
financial-services firm might have to bring troubled investment
vehicles onto its balance sheet. .
The Nasdaq Composite Index (RIXF) shed 77.07 points, or 5%, to
1,452.26.
In his one and only term as president, George H.W. Bush presided
over a 14.5% advance in annualized returns on the DJ Wilshire
5000.
Ronald Reagan presided over an annualized gain of 12.1% in his
first term and then a climb of 16.1% during his second, translating
into an overall annualized rise of 14.1% when he left office in
1989.
Bill Clinton had the best results overall, at least in looking
at yearly returns from the broad-market gauge. The Wilshire rose
17.7% during his first term, which ended in 1997.
Of course, Clinton fared less well, in both political and Wall
Street terms, during his second term. Yet the index still climbed
13.5% for a collective 15.6% during his eight years in the Oval
Office.
"When you look the previous administrations' stellar returns,
some people would say the extraordinary performance over 20-plus
years was the biggest bull market of our lifetimes, and valuations
are just coming back in line. Yet over 28 years, from the beginning
of Reagan to the end of Bush 43, it's a gain of about 9.5%. It
drives home the point, the sound advice to be a long-term
investor," said Bob Waid, vice president at Wilshire Associates
Inc.
"If you need to have cash within a five- to seven-year period or
are approaching retirement, it is better not to have large-risk
exposure, and equities are a risky asset class," he added.
The global equities market already is off to a less than solid
start for the year. January is showing "scary similarities to last
January," according to Howard Silverblatt, senior index analyst at
Standard & Poor's.
Last January was one of the worst months up to that point, with
global markets declining 8.39% and losing $3.28 trillion.
For the first half of this month, according to Silverblatt, the
global market losses came to $1.23 trillion.
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