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Do the Markets Hate Obama?
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Every time the president or his administration makes a major economic announcement, the Dow takes a dive. But are they actually related? Let’s go deep inside the numbers.
Stock markets hate President Barack Obama. The argument was made last Friday on television by columnist Fred Barnes, and you can expect to hear the claim again today if stock markets fall after the Obama speech to the nation last night.
Here is what Barnes said on Fox News last Friday: "Financial markets are a bet on the future in America, and right now financial markets are betting that the future is grim. When markets dropped 800 points since Obama became president, and 2,200 since he won the election, that is a vote of no confidence on his economic policies."
To the extent the markets do anything even semi-predictably, however, they rise on the rumor, and fall on the news.
Radio talker Sean Hannity repeated and expanded the claim on his radio show Tuesday. It required some selective ignorance on Hannity’s part, as, under the spell of Ben Bernanke’s testimony, the Dow was simultaneously re-tracing its Monday losses. Mind you, no one has ever accused Hannity of letting the facts get in the way of a strongly held view.
Nevertheless, Barnes and Hannity cite two data points in making their claims. First, markets are down 11 percent since Obama's inauguration. Second, markets have tumbled on days when the Obama administration has made major economic announcements.
There is no denying that US markets have declined sharply since Inauguration Day. The Dow Jones Industrial Average is in fact off 11 percent since the eve of inauguration, which is awful. Given, however, that the current recession is more than a year old, and the most recent downward cycle didn't somehow start the morning of January 20, we need to put the post-inauguration market underperformance in context.
The credit crisis began its current leg down in September 2008 when Lehman Brothers Holdings went under. Tracking Dow performance from that day to inauguration, the index was down 28 percent. So, while the stock market has done poorly since President Obama took office, it did even worse in percentage terms during the months immediately preceding the presidential change. Should we be arguing that the markets also hate Republicans? Sure, go ahead if you want to, but a more appropriate interpretation is that both parties' politicians are getting pulled out to sea by the biggest economic calamity since the Depression.
How about the second argument, the idea that the market has sold off when the Obama administration has made economic pronouncements? Before explaining why that's a naive position to take in the first place, whatever the party affiliation of the current White House occupant, I'll briefly take it at face value.
Barnes claims the market has fallen twice when the Obama administration made economic announcements. First, he says, it tumbled when Treasury Secretary Timothy Geithner made his non-announcement announcement with respect to a concrete plan for the US banking system. Second, he argues, it tumbled when President Obama signed off on the stimulus bill. Those have been the two planks, so far, of Obamanomics, and the markets were off 4.6 percent and 3.8 percent, respectively on the two days. Ouch!
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Paul Kedrosky is the editor of the business blog Infectious Greed. He's a senior fellow at the Kauffman Foundation, where he is focused on entrepreneurship, innovation, and the future of risk capital. He is also a strategist with Ten Asset Management, a Southern California institutional-money-management firm.
The right is already prepared for every occurrence in the market. When stocks go down, it was Obama 'talking down' the market, as Sean Hannity likes to say. As if the market were a naughty puppy. Next up Rush Limbaugh will counter that recessions naturally work themselves out in a year or two. So when stocks go up, it wasn't Obama at all, but free markets.
These guys really aren't credible, but every idiot likes to be told he's right, that just because you're paranoid doesn't mean they're not after you.
the reason thay hate him is because he will not just take a wheel barrow up to wall street and dump money at their feet and that is why the repubs are upset too there is not enought for the lobbyists to slid some in their pockets
When a guy gives a speech that doesn't give any details, but makes statements like, "America invented the automobile," when everyone recognizes Herr Benz, of Germany as the inventor, what do you expec?. We invented the assembly line, not the auto. It is pretty clear they are making this up as they go.
Isn't it in the realm of possiblity that the stock market is being manipulated? Could the $350 billion giveaway in 2008 have been the purchase price on a political quid pro quo? Prior to the shocking (for some) reality of President Barack Obama, the stock market rallied every time he made a speech, remember that? The media made a big deal about it in Obama's favor. It's in the realm of possibility that the dark, angry forces opposed to our President -- considering his threat to end massive corporate and government theft -- found common cause in reversing the dynamic.
I am sure Bush is manipulating the market, right?
Bank losses and housing deflation are bringing down the market now, but the outlook bends down with announcements by Obama. The markets don't hate Obama they simply interpret what he says to be bad for markets. They are right. Markets are often moved daily by emotion but rationality carries the longer term trend.
I took a contrary position yesterday thinking Obama may pump up expectations and was I wrong, the Dow is down 158 at this writing. My enthusiasm for Obama hurts my trading strategy, but this has little to do with hating him, I don't. I need to be more rational.
Do the markets hate Obama ?
This is the answer straight from the White House ...
The feeling is MUTUAL ...
9600 on election day to 7300 today is due primarily to the fact that Obama's prescription for the economy is poison to our private sector economy - he is growing govt and strangling the private sector with more taxes regulations, deficits and talking-down. The last President to raise taxes on the rich in the middle of a recession was Herbert Hoover. Now Obama plans a repeat. It's amazing how god-awful wrong his economic policies are. They are doing what we KNOW ALREADY FAILED - in Japan 1990s and elsewhere: Prop up failing banks and spend-spend-spend. Does it work? NO!!
A trillion dollars in Government spending, ading to the debt and deficit and future taxes, will only grow govt dependency and reduce long-term ecnomic growth. This is why even CBO scored the trillion dollar boondoggle bill as having lower growth in 10 years than doing nothing.
The market smells the failure of his economic policies to help the private sector a lot better than any pundits.
nikkya& jenny4hill
AGAIN WITH THE NONSENSE THE DEMOCRATS ARE 4 THE LITTLE GUY AND THE FREE-REPUBLICANS ARE FOR THE RICH
WHEN IN ACTUALITY
DEMOCRATS= EXPLOIT THE POOR @ SMALL BIZ EXPENSE ONLY TO TRANSFER WEALTH TO THEIR CORPORATE LOBBYS AND THEIR OWN POCKETS
WE ARE ABOUT TO SEE THE LARGEST TRANSFER OF WEALTH NOT TO THE NEEDY AND THOSE WHO NEED JOBS....BUT TO THE DEMOCRAT CORPORATE LOBBYS LIKE GREEN LOBBYS THAT NEVER CREATED A SINGLE JOB
.................
SO MUCH FOR LOBBYIST FREE-REPUBLICANS HEH?
THE MARKET HATES OBAMA BECAUSE HE ONLY WANTS TO PILE MORE WEIGHT ON BUSINESSES BACK W/ SOCIAL PROGRAMS AND TO THERE NEW GREEN ECONOMY PROGRAMS
...! AND DEAL IN KEEPING PEOPLE "DEPENDANT ON GOVT. FOR EVER (POWER)
WELCOME TO THE Socialist-Fascisto States of Amerika and the NWO and new State Religion of Global Warming.
ALL BOW!
to the tune of 856 Billion of your money to create "The SuperState Corporation"
......where as NO other Corporation except those getting tax payers money aloted by "Big Brother" will be able to compete.
All others shall pay to create it
"for OUR OWN benefit" ........because they know better than us what's good for us!!!
By the Way what exactly is a "Green Job" ? does anyone know anyone whom has one?
And is China, India ..And are the Russians exactly worried about CO2~?
Because Al Gore sure isn't with his 3 private jets and all-terrain gas guzlers and house the size of three city blocks that uses more energy then three New York City Blocks!!!
I disagree with this article.
What PD ignores is that the markets began crashing right around the time that Obama erased McCain's lead as calculated on RealClearPolitics. This is how it played out. Lehman collapses on Monday. But the market did not. John Taylor recently misinterpreted the timeline to argue that it was government's response to the Lehman collapse that caused the downdraft. Sort of PD's argument. What is missing here is that the polls at this time were tracking polls, calculated on a moving average. It took time for voter sentiment to reveal itself. But it did. A reasonable interpretation of what happened is that the Lehman collapse caused voters to lose confidence in the ability of the Republicans to manage the economy. And they became fearful. The latter, not surprisingly, made them turn to the party of government. It wasn't really until this trend confirmed itself, and thus increased the likelihood that Obama would win, that the markets really tanked. And in effect, it became a self-fulfilling prophecy. As markets declined, Obama solidified his lead. As Obama solidified his lead, markets declined.
A rejoinder to this argument might be that Obama was ahead all summer. Perhaps. But lots of informed people doubted those polls, and lo and behold, when the country got a good look at the two candidates during the conventions, they shifted strongly to McCain and the Republicans. In the beginnning of September, it looked very much like a replay of 2004.
Additional point: remember what the drug stocks did, when Hillarycare was being debated.
Additionally, a quote from the recently published book, "The Panic of 1907."
"Should Roosevelt and the Progressives really be implicated in the crash? .... Markets are highly sensitive to changes in government policy (such as rate regulation, taxation, and antitrust enforcement) that affect the underlying drivers of value. By late 1906, the radical shift in government policy was apparent. Roosevelt's speeches only confirmed the shift. He was both messenger and message and thus deserves a place among the drivers of these events."
Of course, Wall Street responds to politics, and I would argue, based on what has transpired in 2009, the market did a good job in the fall of 2008 of discounting future events.
So why has Wall Street and the business community been so kind to Obama given his clear ideological predilections? Obviously there is no single reason. Racial conciliation is presumably one factor. And good form requires that he be given a chance. But I think the deeper reason is culture and specifically the culture wars. In the circles in which business leaders run these days, conservative views on the social issues are not publicly acceptable. Consciously or subliminally, they realized that a Republican victory would almost certainly have shifted the balance of the Supreme Court. Sam Alito. No more David Souters. And so they let culture trump economics.
At least that's the best way I can understand what's happening.
Kedrosky appears as an apologist for Obama and an academic Democrat card carrying one at that (I'm guessing).
So he argues that in the short term markets are random (sort of Brownian motion) - typical academic claptrap. Do yourself a favor. Pull up a chart of the Dow over the last six months and ask yourself whether the huge trend is random.
(Kedrosky was careful to use 'in the short term', but what exactly is the short term in this context. I would have through a day or two was short term. Not the time Obama has been in power.)
I think the answer is simpler: despite all the public support for Obama in the media and even in the financial industry there is an almost palpable understanding among those who invest in the market that he is an extremely inexperienced and naive individual, ideologically driven.
And that perception has the markets frightened. who can blame them.
it ain't obama......it's dem damn mice... they keep shitting in the poison and now dem chickens are on the roost and we're running out of shotgun shells.....gimme me another bag of that wacky tabacky
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