President Obama's Effect on the Market

There has been a lot said about the new direction this administration is taking and how it may affect different sectors, industries, or the market as a whole. With the new health care platform, the change in energy initiatives, and the ever-changing situation with our financial institutions, it’s hard not to pay attention to how the market reacts as these plans take shape and are revealed. For a comprehensive view of our thoughts on key issues with the new administration and the financial markets, please read our Monthly Market Review.

Below is a chart (click to enlarge) that displays the S&P 500 levels from 9-22-08 to 2-28-09 and the major political events that occurred during this time period. It appears that as it became clear that Obama would be our next president 9-24-2008, the markets began to put in their economic vote. Obviously there are other issues surrounding the markets that is not the doing of this administration or the new president; however, it has certainly been difficult for the market to find any positive outlook to act on subsequent to his speeches. We will track this market sentiment as time goes on to give our readers a visual snapshot of the market reaction to the upcoming major political events.

S&P 500 Levels and Major Political Events 9-22-08 to 2-28-09

Comments

[fireball:]

well he has certainly provided me with incentive to get out of all serious investments and turned me into a dabbling trader. he also has inspired me to retire 15 years early so as not to produce to pay more taxes. tendencies imply many others feel the same. my brother just closed down his small business. this is a spreading trend. you can't raise taxes on zero. (i hope)

Mar 10 09:21 AM

[Hexan:]

The same thing was said about Hoover. Everytime he spoke the market dropped.

Mar 10 09:26 AM

[Duude:]

To be entirely fair, the economy has been sinking for months before the election and the credit freeze last fall put the economy into a tailspin. Any leader lacking in specific, exact and fast measures to affect the melancholy mood of market investors would have been the only thing that could have stemmed the riptide market. That being said, we haven't gotten anything capable of changing confidence. Even today's rally is more about being in a truly oversold condition, and have been for two weeks now. Just another rally in a bear market. Now they're trying to pass 'card check' today. Wow! That's going to help. Business must really like more unionization in the face of a horrific recession. Fortunately, we already have word they don't have the votes in the Senate anyway. Just a liberal show of voting on a measure they promised labor.

Mar 10 12:06 PM

[jdl51:]

Well, we got eight years of republicans saying the economy wasn't George Bush's fault even though republicans were in charge of oversight, both houses of congress, Treasury, SEC, Fed. Now Obama's been in office, what, six weeks now and they're already calling it the Obama recession even though GDP was down over 6% in the 4th quarter. And now they're all upset and talking of a tax revolt because Obama will raise taxes a whopping 4.5% on people making more than 250,000 and giving a tax cut to 95% of the American public. That brings it to the level Reagan, that flaming socialist and destroyer of economies, set it at in the '80s. After $11 trillion in republican debt since 1980 with nothing to show for it, it seems like most republicans are content to just slip the bill to their children and grandchildren instead of taking personal responsibility themselves.

Mar 10 12:13 PM

[Steve in TN:]

"...because Obama will raise taxes a whopping 4.5% on people making more than 250,000 and giving a tax cut to 95% of the American public.."
Unfortunately, the rumors about future congressional action consists of increasing the witholding tax covering $106K of income to an enlarged $250K of income.
The Obama tax strategy: If income exists, tax it.

Mar 10 02:38 PM

[AndrewBaker:]

We're in for four years of socialism at a time we can't afford it. No wonder the market is going further down.

Mar 10 04:12 PM

[a. palmer jr.:]

I have to agree with the above. The best thing government can do to help the economy is to leave it alone.

Mar 10 08:54 PM

[terryg8:]

On Mar 10 12:13 PM jdl51 wrote:

> Well, we got eight years of republicans saying the economy wasn't
> George Bush's fault even though republicans were in charge of oversight,
> both houses of congress, Treasury, SEC, Fed. Now Obama's been in
> office, what, six weeks now and they're already calling it the Obama
> recession even though GDP was down over 6% in the 4th quarter. And
> now they're all upset and talking of a tax revolt because Obama will
> raise taxes a whopping 4.5% on people making more than 250,000 and
> giving a tax cut to 95% of the American public. That brings it to
> the level Reagan, that flaming socialist and destroyer of economies,
> set it at in the '80s. After $11 trillion in republican debt since
> 1980 with nothing to show for it, it seems like most republicans
> are content to just slip the bill to their children and grandchildren
> instead of taking personal responsibility themselves.

I will share a recent email I sent as my reply

Well, just when you had given up all hope of ever retiring in anything less than object poverty (meaning that you would live on the pittance provided by Social Security) Barrack Hussein Obama saves the day! I mean I had given up almost all hope! I bet you are like me in that my 401K and IRA are both down around 50% and the value of my modest home is down about 50% as well! That seemed pretty bad to me. I even started thinking that maybe I was in trouble even though I had lived a very conservative financial life. Maybe I was never going to retire.

Of course, I was dead wrong. How silly of me! You see B. Hussein Obama even as he serves us all as our President, Leader of the Free World, Controller of our Economy, Robin Hood to the Poor and Exploited, Military Genius, Moral Compass to this Generation, and the new Son of God Incarnate, took the time to become our National Investment Advisor! I mean, really, how lucky are we to have him in the Oral Office? B. H. Obama CCO (Certified Community Organizer) has called the bottom of the market and told us that. well, here is the link to hear his words of wisdom...

www.youtube.com/watch?...

Unfortunately, he didn't exactly tell me where to put that small portion of my retirement that I still have left. Maybe he was saying that everything was going to go up! I think it is great and amazing that stocks are going to soar even as Obama raises the Capital Gains Tax by 25% and is planning to tax the money we put into our 401K plans. How did he do that and still get the market to go up? With Obama in office anything seems possible to me now! Still, I think I should stay conservative, so, let's see...

Health Care is a traditionally conservative investment. Gee, they have had the hell kicked out of them lately. Maybe it is the fact that we are headed for a Nationalized Health Care System that has caused Health Care Stocks to fall so much. Nationalized Health Care means price controls on drugs as well as services. In other words, not much profit and not many new drugs, or new life saving devices, or advanced health cares services. Now Obama has told us he will pay for this with a tax increase on those making over $250,000 per year. The math doesn’t work but hey, Jesus fed thousands with a few fish and a loaf of Webbers, so, I know Barrack will do this too. Still, I think maybe health care in not a good investment.

Defense is always a good investment in a bad economy! No responsible President would endanger our nation by failing to provide defense right? Of course, Obama just won the war in Iraq in only 5 weeks so that could hurt business and there are now no other threats out there that we might need to defend ourselves from, right? This must be the reason that the ONLY area CUT in the OBAMA $3,600,000,000,000.00 BUDGET was DEFENSE! I'd better look elsewhere for an investment.

How about Financials? Gee, the dividends are pretty high except they are all going to be cut to zero. Their bonds are yielding about 25% but are all about to go into default. Even the good banks like Bank of America are now insolvent thanks to doing the deals that the Government forced upon them. The equity positions of current stock holders are wiped out and the Government actually already owns them. Maybe I should look elsewhere!

Why not energy? Of course, we have to be careful here. Obama already told us that Coal is dead as an industry even though it provides about 70% of our electricity, so that won't work. Oil may not be the best choice especially if that economic genius, Maxine Waters, has her way and nationalizes the industry. No drilling means lower profits and more dependence on foreign oil! Nuclear, you're kidding right? Why would we want to invest in an energy source that is clean, renewable, and not dependant on foreign sources? Solar, Wind, and Geothermal? Well, Obama likes them but gee, none of them seem to make any money. Maybe that is because they are not viable sources for our energy needs! Better look on...

Consumer Discretionary? Wow, with that whopping $13 a month tax cut we could turn the whole economy around! Still, I don't see consumers buying too many cars, or big screens, or much of anything else. This is because the American consumer is flat broke, deep in debt, or losing their jobs, and soon enough will be faced with huge tax increases no matter what Obama might promise. Better move on.

Home Builders? Ha Ha Ha Ha!!!!

Technology! Yes, except that the S & P just reported a quarterly drop in profits of 51%! That would be the largest quarterly drop in history. I wonder if Mr. Obama knows that the Price to Earnings ratio he so confidently told us all is so low is related to those evil profits? Gee, do you think that maybe companies with falling profits and who are laying off employees might not invest in IT in the next few years?

Ok, how about US Treasuries? Let's see here, I get about 3% on a 20 year investment but at least that is safe, right?. The Government just passed a budget that is under funded by 40%. Wow, that is a lot of debt to service! It represents about 30% of our GDP up from 13.5% the first 6 years of Bush and 20% the last 2 years of the Bush administration when the dems took control of Congress! The Heritage Foundation just calculated we will be running a deficit of at least $1,750,000,000,000.00 for each of the next 10 years! Let's see here that would be $17,500,000,000,000.00 from the budget over 10 years plus about 6 years of debt for Nationalized Health Care (we will assume an additional tax here to help pay for it) adds another $6,000,000,000,000.00 in debt then we add the current debt of about $8,400,000,000,000.00. Now, add the $900 billion, carry over a few Trillion and we come to a debt of $31,900,000,000,000.00 by 2019! That would be nearly double our projected GDP in 2019. That would pretty much make the US bankrupt and those Treasuries, worthless.

I pretty much give up here. Maybe if I knew who the largest Corporate contributors to the Obama Campaign were, I would know where to invest my money. Maybe I should just call Madoff Investments. I think the outcome would be pretty much the same.

Mar 10 10:42 PM

[fahrender:]

"there's a difference between buying a house and buying a house on fire." - Jamie Dimond

The American economy was already "on fire" long before Obama was elected.
Wall Street and big corporations begged the government to do something.
The American voters emphatically rejected Republican policies in November 2008.
Barack Obama has been in office less than two months.

Am I happy with what Obama has done to date?

No. But,I do not blame him for the way things are on March 11, 2009.

I'm not a big fan of socialism either, but slash-and-burn-neocon-... got us where we are today and it sucks. lost %50 of the value of your portfolio or house? tough. you live in a capitalist country where all of the safeguards which would have at least minimized this mess were hacked away due to the bullying influence of corporate lobbyists.

unfettered capitalism has done this to America more than once, but the greedy and the powerful don't really care because they'll get by no matter what.

Obama will probably stumble through this mess one way or another. It will not be pretty. The Republicans and their leaders Mitch McConnell, Richard Shelby and Rush Limbaugh and John Boehner are doing everything they can to poison the waters. Their patriotism is very suspect.

Mar 11 05:13 AM

[zorkfin:]

Fahrender you spoke as a true patriot. I hope all of your money is in the market and that you buy and hold to do your patriotic duty.

Mar 13 03:27 PM