Will Obama bring the bull or the bear?

President-Elect Barack Obama may have received an overwhelming endorsement from the voters, but Mr. Market is still undecided.

The two days following Obama’s election, the market posted a woeful sell-off of more than 900 points in the Dow. That was followed Friday by a decent gain of around 250 points in the Dow, but on light and unconvincing volume.

The jury’s still out on whether Obama, a Democrat, will cause stocks to rise or fall.

Conservatives fear his promises to raise taxes on the wealthy and intensify regulation may put a damper on any potential climb in the stock market.

But others hold faith in the fact that Obama has aggressively engaged financial experts — among them, former Federal Reserve Chairman Paul Volcker — to seek a solution to the current economic crisis.

Obama also has support from some heavy-hitters in the investment and business world, including Warren Buffet and Google CEO Eric Schmidt.

Only time will tell.

Maybe a peek at history holds a clue.

When former President Bill Clinton, another Democrat, entered the White House in 1993, the Dow was just at 3,300. Seven years later, it was at nearly 11,000 — an increase of more than 200 percent.

Ditto the Nasdaq, which rose from just under 700 to 3,900 during the same period.

Obviously, Obama has a tidal wave of obstacles to overcome before he can work the same magic.
General Motors (GM) has said it is nearly out of money, Goldman Sachs (GS) economists are predicting the worst unemployment since the end of World War II — 8.5 percent by the end of 2009 — and retailers are expecting anything but a jolly Christmas.

The hope that we could limp along for a period, relying on the growth of foreign and emerging markets to lift all boats, has also been dashed, as governments abroad are slashing their interest rates and racing to stave off their own recessions.

Headlines in the Wall Street Journal and other business publications read like obituaries, with companies laying off workers, postponing expansions and even heading to bankruptcy court.

Some are already beginning to question whether Obama’s enthusiasm and sense of urgency are enough to conquer this current landscape.

Of course, when things get this bad, some advise it’s time to buy.

But a roundup of hedge fund newsletters by MarketWatch this past week suggests there are still many who are hesitant to begin buying equities.

Some of those highlighted in the MarketWatch piece suggest it will be another couple of years before it’s truly safe to buy stocks.

One of those was Kyle Bass, managing partner of Hayman Advisors, who told investors in an Oct. 17 letter, to "be careful buying ANYTHING today."

According to the MarketWatch piece, Bass was also highly critical of a recent editorial in the New York Times from Warren Buffet suggesting that now is the time Americans should begin buying stocks. After all, Buffett wrote, that’s what he is doing.

"Mr. Buffett has enough money to be able to have his holdings drop 50 percent and still fly in his jets and live the way in which he has become accustomed," Bass wrote in his investor note. "Do you have enough capital to take what you have left, cut it in half, and continue to live the way you have for the past few years? I don’t."

I still remain in stocks, though I fortunately cut my position in business consulting firm FTI Consulting (FCN) days before a lousy earnings forecast shaved 24 percent off the share price. FTI was a recent high-flyer and started looking shaky. I don’t want to take any chances the way things are going. This time my concern paid off.

Brian