Obama victory priced in the market, says columnist

The Wall Street Journal today has an insightful article by George Newman, “an economist and retired business executive.”

Newman brings up a new rationale for the steep drop in the stock market — that investors have already priced in a likely Obama victory.

The valuation of an individual stock reflects the collective expectation of investors about a company’s future profits, dividends and appreciation, and the same is true of the market as a whole. These profits, in turn, are greatly influenced by government policy on taxes, spending, subsidies, environmental and other regulations, labor laws, and the corporate legal climate. Investors have heard enough from both candidates in the last month or two to conclude that prospects for a flourishing, competitive, growing and reasonably free economy in a McCain administration are bad, and in an Obama administration far worse. (In fact, the market’s bearish behavior over the last couple of months pretty closely tracks Barack Obama’s gains.)

He provides some questions that investors may ask themselves as they make their decisions. Here are just a few:

– Have you thought of what a gradual doubling (and indexation) of the minimum wage, sailing through a veto-proof and filibuster-proof Congress, would do to inflation, unemployment and corporate profits? The market now has.. . .

– Have you thought of how a Treasury Secretary George Soros would engineer the double taxation of the multinationals’ world-wide profits, and what this would mean for investors (to say nothing of full-scale industrial flight from the U.S.)? The market now has.. . .

– Have you thought of how a Health and Human Services Secretary Hillary Clinton would fix drug prices (generously allowing 10% over the cost of raw materials), and what this would do to the financial health of the pharmaceutical industry (not to mention the nondiscovery of lifesaving drugs)? The market now has.. . .

– Have you thought of how the nationalization of health insurance, the mandated coverage of ever more — and more exotic — risks, the forced reimbursement for excluded events, and the diminished freedom to match premium to risk would affect the insurance industry? The market now has.

– Have you thought of Energy Czar Al Gore’s five million new green jobs — high-paying, unionized and subsidized — to replace, at five times the cost, what we are now producing without those five million workers, and what this will do to our productivity, deficit and competitiveness? The market now has.

Great questions, all. Read the whole article for the complete catalog.