Welcome to the Barack Obama bear market. On Inauguration Day, the official beginning of the era of “hope” and “change,” the Dow stood at 8,281. On Friday, it closed at 6,626 – the fastest drop for any president in more than 90 years. Given his track record so far on economics, no wonder Obama wants to talk about health care instead.
But before Americans decide to trust the President to “reform” the greatest and most innovative health care system in the world, they might want to take a look at the Administration’s approach to addressing the nation’s most pressing crisis. What policies have Obama and his team presented to reassure the markets and offer the promise of stabilization and renewed growth?
The short answer: None. Rather, the Obama team has inadvertently (one hopes) followed a course that has succeeded only in depressing the market by spooking Wall Street and heightening the climate of fear. Industry by industry, the Administration has sown the seeds of uncertainty through its policy pronouncements and trial balloons over the past month.
How can energy stocks prosper, given Obama’s embrace of cap and trade legislation – which, studies show, would result in electricity prices jumping by 5-15% by 2015, natural gas prices up by 12-50% by 2015, and gasoline prices up by 9-145% by 2015? How can bank stocks stabilize and rise when the administration allows talk of nationalization? And when the President suggests that health care reform might be outsourced to a Congress led by Nancy Pelosi, what does anyone expect that to do to health care and insurance industry stocks?
President Obama’s budget continues the assault on the market. The significant cuts he’s ordered in national defense are bound to drive defense industry stocks lower. And by proposing limits on deductions for mortgage interest, local property taxes and capital gains exclusions on up to $500,000 in sale profits, he’s aiming squarely at the housing and banking industries – areas that must be helped, not hurt, before the economy will recover.
What’s most remarkable is the President’s apparent inability to grasp the impact of the market’s fall on ordinary people. Speaking last week, he analogized the market’s fluctuations to a campaign tracking poll – using, perhaps, the only frame of reference his limited experience offers. But the analogy is a flawed one.