Warren Buffett“A public opinion poll is no substitute for thought.”
Adlin Sinclair“Success is a welcomed gift for the uninhibited mind.”
Obama share scare: Market drop shows vulnerability (AP)
NEW YORK – It was the fat cats’ fault before. But now it’s becoming Obama’s.
stubbornly high, people were already shifting blame for their economic woes to
one year into his presidency. Last week, investors joined them.
For 10 months, the stock market climbed at breathtaking speed. But the
suffered its worst week since dropping to a 12-year low in early March. It fell 552 points Wednesday through Friday, including 216 on Friday.
on Tuesday. When Obama responded on Thursday with a broadside against big banks, the market plunged. On Friday, investors feared mounting opposition in the Senate could derail
. Disappointing corporate earnings and concern that
will slow its economy added to the jitters.
The question now: If the bad news continues, will Obama, who is trying to win votes in the fall elections with his populist attacks, end up losing them instead? Put another way, can Obama win over
statements again?
“The longer we’re in (power) the more it becomes our problem,” said
, a Democratic media consultant and former senior adviser in
Sen. John Kerry
’s 2004 campaign for president. He added, “This is a
in the presidency when he needs to reassure voters that their future is secure.”
And that’s especially true for voters who have a stake in the stock market. For years the number that politicians worried about was the
. In the 1970s a second figure was added — the inflation rate.
Now, with 45 percent of households owning mutual funds, up from 6 percent in 1980, there’s a third: the Standard & Poor’s 500 Index.
It’s anyone’s guess whether jobs and stocks will be up when Americans head to the polls in November. And even before the events of the past week, the stock market was jittery. Investors had driven shares up at their fastest pace in decades, and analysts said many were looking for an excuse to sell.
A clear sign the market was in trouble came a week ago Friday. Chip maker Intel announced profits were a lot higher last quarter than analysts had expected.
Its stock fell anyway.
. holiday, the indexes hit 18-month highs in anticipation of Republican Scott Brown’s likely victory in the race to replace the late
Sen. Edward Kennedy’s seat
.
and pharmaceutical companies led the gains because a Brown victory endangers the massive health care bill favored by Obama and the Democratic majorities in Congress.
announced plans to slow its economy. They fell again the next day after Obama’s speech calling for limits on the size of banks and their risk taking.
The coup de grace for the market came Friday. In a nod to voter anger at
, a few Democrats said they wouldn’t vote to reappoint Bernanke, whose
. 31. But many investors have faith that Bernanke has the tools, the know-how and the political backbone to reel in the unprecedented amount of money pumped into the economy during the
and avoid a crushing round of inflation. Bernanke still has Obama’s support.
is expected to vote on giving him a second term by the end of the week.
closed the week at 1,091.76, down 5.1 percent in three days — its biggest drop since March 2009.
Hank Smith, chief investment officer of equity at Haverford Investments in
Radnor, Pa
., warned investors to expect more stock gyrations.
“The market is overdue for a pause, a pullback, even a correction,” he said, referring to a fall of 10 percent from a peak.
This week is chock-a-block with news that could help shares retrace their lost ground, or sink further.
meets on interest rates, Bernanke faces that reappointment battle in the Senate, a cavalcade of earnings reports is due and the government gives its first estimate of how the economy performed during the final three months of 2009.
Politicians will be watching the market’s reaction closely.
, the conservative head of
, said the nation’s investor class is increasingly calling the shots in elections. He says Obama is hurting himself with his bank bashing.
“A lot of Americans own 401(k)s — and he’s just made them a lot poorer,” he said, creating “a lot of bitterness” among voters.
Just how much bitterness, if any, voters will have depends on which numbers they fixate on. Even after the recent drop, the
is up 61 percent since its low in March, three months after Obama took office. Then again, the index is still 30 percent below its
peak.
Of course, it’s not just Obama. The vote in
scared all incumbents. It’s now every man and woman for himself or herself in Washington. That helps explain the opposition to Bernanke.
There’s another view, too: Policy counts more than ever in this
, but the market, and the fragile economic recovery upon which it hinges, is still largely the work of big, impersonal forces — even if impatient voters don’t see it that way.
UBS economist George Magnus said a big issue today is that banks and consumers, two years after the recession began, still need to rid themselves of debt. And this painful deleveraging could continue long after the salutary effect of monetary and fiscal stimulus runs out, he said.
He doesn’t think that’s likely to lead to a double-dip recession, but he’s not ruling that out either.
“We’re in a bungee jump recovery,” he said, meaning we’re bouncing back from last year’s deep plunge. But that could be a prelude to a scary fall again. If so, he said, Obama “will get the blame anyway.”