Obama and the Stock Market

According to Bloomberg back on March 6,

The Dow Jones Industrial Average fell 20 percent since Inauguration Day through yesterday, the fastest drop under a newly elected president in at least 90 years, according to data compiled by Bloomberg. The gauge lost 53 percent from its October 2007 record of 14,164.53, slipping 4.1 percent to 6,594.44 yesterday.

Obamas enemies duly fastened the Dow Jones millstone around his neck, for example, here,

Well guess what, folks…as ANY economist will tell you, capital markets are forward-looking. The Dow Jones Industrial Average usually rises and falls based on expectations of what will happen, not based on what’s happening right now. In other words, if stocks fall, it is because investors believe the future is looking bleak, not because the present state of the economy is bad. Note that the stock market collapsed in 2001 in anticipation of the recession that followed. The stock market is collapsing now in anticipation of the fact that Obama’s plan will be ineffectual.

and here,

To those critics who claim that Obama can’t possibly “own” the decline in the stock market sincehis election, recall that these indices are a kind of futures market, with investors buying in (or selling as the case may be) based on how they believe the economy will do.

Let’s see, the stock market stood at 7949.09 at the close on Inauguration Day. Today it closed at 9361.61. Is there an economist in the house? Do these arguments work both ways, or are we dealing with what scientists call an irreversable process? Seems like it’s risky to play the stock market, both economically and politically.

Author: Helian

I am Doug Drake, and I live in Maryland, not far from Washington, DC. I am a graduate of West Point, and I hold a Ph.D. in nuclear engineering from the University of Wisconsin. My blog reflects my enduring fascination with human nature and human morality.

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