Obama Goes Up While the Market Goes Down

The Dow is down 25% since Jan 1st. Another 10% from the day Obama was elected through the end of 2008. I've been thinking about what this means and how to square that with Obama's still relatively high poll numbers. At first glance it seems that the market and Obama's approval ratings should track fairly closely. But here's why I'm not so sure that is necessarily the case.

First, as of 2006 a whopping 41% of Americans had no tax liability after deductions and credits. Now the President has recently come out and said that he's going to raise taxes on the top 2% of income earners and give tax cuts to everyone else. So what does that mean? It means you've got 40% of wage earners who not only pay no taxes, but now will be receiving the equivalent of a welfare check. That's on top of everyone else that is currently on welfare. I have no idea how many American's that is if you add those two groups together, but let's say its close to 50%. It is no wonder then that the Presidents approval ratings are so high when half of all American's are getting kickbacks at the expense of the wealthy.

The market, however, is a completely different animal. The people on welfare and presumably those lowest 2/5ths of wage earners are not investing in the market. Its the wealthy, those making $200,000 or more that are putting money in and pulling money out. When the President makes it known that he's going to punish the wealthy by taking more of their money, its not surprising to see the market enter a free-fall. Why? Because the market is forward-looking. This point is proven in this NYTimes article. It discusses how back in October the mere prospect of the credit markets thawing caused the DOW to rocket up over 400 points. And we were told by Obama's campaign many times that just the mention of a stimulus package would jolt the market back in the right direction. So even Obama's people recognize that the market is forward looking or they wouldn't have made statements like that. But businesses can see the where the Obama policies are leading the economy. There is no value in investing and making profit when the government is going to take more and more of what you make. So while the majority of Americans who are on the dole are in favor of Obama, those that make this country run are voting with their money, and the stock market clearly shows the result.

Which brings me to an article today from ABCNews where Press Secretary Robert Gibbs commented that the stock market is a "lagging economic indicator." Obviously he is trying to spin the poor market results in favor of the President, but please Robert, even the liberal NYTimes knows better. I don't know if Obama or his assistants instructed Mr. Gibbs to say that, but it clearly shows either a severe lack of economic understanding or an outright attempt at deception.