Some investors and pundits blame Obama for the market’s dismal performance. He inherited a mess, but his rhetoric isn’t helping.
Obama’s Radicalism Is Killing the Stock Market
The market’s verdict so far this year: There is no future.
The continuing meltdown in share prices, the worst since the Great Depression, now has become Exhibit A in the political battle between the Obama administration and its harshest critics.
Conservative pundits including Rush Limbaugh and CNBC-TV’s Larry Kudlow assert that the president is waging war against capitalism itself, with his tax-hike proposals, social programs and banker-bashing rhetoric. That has sent disillusioned investors fleeing, they contend.
Well, something has. After diving 38% last year, share prices are down 24% just since Jan. 1, as measured by the Standard & Poor’s index of 500 big-name issues.
Despite a slight uptick on Friday, stocks plummeted 7% this week alone.
The decline from the market’s peak in October 2007 now is 56.3% — the steepest drop since the plunge of 1938 to 1942, when no less than the future of democracy was at stake.
“I think everybody is afraid of Obama,” said Todd Leone, a veteran stock trader at Cowen & Co. in New York. “They’re afraid he’s a socialist.”
Yes, the S-word.
Others say the market is more upset with the administration’s failure to stabilize the ravaged banking system — a Herculean task that Wall Street had hoped would be the first major challenge the White House tackled.
“Every time Obama talks about something like healthcare, the market’s reaction is — ‘No, the banking crisis!’ ” said Jeffrey Schappe, investment chief at BB&T Asset Management in Raleigh, N.C.
Treasury Secretary Timothy F. Geithner still hasn’t provided specifics on his plan to get rotting loans off the balance sheets of major banks, a step seen as crucial to jump-starting new lending.
For his part, the president this week advised investors to look beyond what he called “day-to-day gyrations” in share prices.
He then ventured into territory where few other presidents have gone. Perhaps taking a cue from fellow Democrat Warren E. Buffett, Obama offered an opinion on whether stocks were bargains.
“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” he said Tuesday.
He didn’t get the lingo right, assuming he meant to say “price-to-earnings ratios,” a measure of stock prices relative to earnings per share. That flub caused snickering among market pros.