Finally, the ship has a new captain. Comrades Bernanke and Paulson have done what’s possible to calm the waters. Much of their efforts have been as effective as raising sunken ships to calm the waves. Imagine in what shape the economy would be in if oil prices remained above $100.

The $700 billion bailout package was aimed at the core of the problem – tight lending. Just yesterday the Wall Street Journal reported that lending standards keep tightening, increasing the risk of a prolonged recession.

Even though the S&P 500 (AMEX: SPY) and major benchmarks bounced off their lows, one could argue that the governments interventions have evaporated like a drop of water on a hot stone. Will President Obama usher in a new bull market?

The “change of guard” effect

Election year bear markets are not rare (1960, 1968, 1976, 1980, 1984, 2000 and 2008). With the exception of Ronald Reagan in 1960, bear market elections brought about a change in the party occupying the White House. 2008 proved no different. Historically, the stock markets spike when the incumbent President is ousted. I suppose this is because of dissatisfaction with the current situation and the hope that things will improve.

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In general, the stock market has performed better under Democratic steward-ship. The Dow Jones (AMEX: DIA) gained an average of 9.05% for each of the 48 years (32 up, 16 down) a Democratic President ruled the roost while Republican Presidents attained a 6.5% gain for each of the 59 (36 up, 23 down) years in office.

The X-factor

Average historical numbers provide guidance for average years, but might prove as inadequate for this bear market as an umbrella for a category 4 hurricane.

President Hoover (Republican) had the unfortunate distinction of being President during the great depression. The Dow Jones lost 17% in the post-election year, 34% in the midterm year, 53% in the pre-election year and another 23% in the election year. Needless to say, President Hoover was not invited back for a second term.

Were the huge losses from 1929 to 1932 the President’s fault? No, it just seems that every now and then, forces greater than any one individual or one administration come along. The bust of the technology (Nasdaq: QQQQ) bubble, the bust of the real estate bubble, the bust of the financial bubble (AMEX: XLF) and the bust of the commodity bubble (NYSEarca: GSP) seemed to have ushered in such a time period.

When in the past have we seen gold (AMEX: IAU), silver (AMEX: SLV), oil (AMEX: USO), agricultural commodities (AMEX: DBA), real estate (AMEX: RWR) and the stock market slide to multi year lows in unison?

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Bill Gross, the famed manager of the world’s largest bond fund (PIMCO Total Return Fund, Nasdaq: PTTRX) said about six months ago that Mr. Obama would win the race for President. He further said in his entertaining newsletter that Mr. Obama will enter the history books at “Trillion Dollar Obama”. Trillion Dollar Obama will have no choice but to rack up the federal deficit and increase taxes.

We have gotten used to double digit returns, delivered faithfully every year by Dow, Russell and S&P. Our retirement dreams were built on double digit returns, but times have changed. $10,000 invested in the S&P 500 exactly 10 years ago would be $8,500 today.

If history is any guide, Mr. Obama will not be in a position to prevent the stock market from sliding further, possibly to multi decade lows. The financial house of cards (as President Bush put it) is falling apart faster than expected.

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