Friday, July 17, 2009
The Stock Market Reacts
Read an interesting examination about how the stock market has reacted to Obama’s stimulus plan vs. how it reacted to Bush’s 2003 stimulus plan. The market predicts the future and recognized that Bush’s plan was pro-business and created to encourage investment, and it reacted positively. When it comes to the socialist Obama, the market is well aware that the current stimulus plan is not meant to stimulate the economy, but to destroy capitalism and build the Democrats base of power. The anticipation of high taxes, big spending, and intense regulation make it clear to the market that the Obama plan will not revive the economy.
From Biz Blogger:
Stock Market Analysis: Bush vs. Obama Stimulus Plans
“Now that 6 months have passed since Obama's ‘stimulus plan’ has passed, I thought it useful to examine the stock market reaction to Obama's plan and compare it to the reaction of President Bush's 2003 stimulus plan.
Bush's plan passed in April 2003 while Obama's passed in February 2009. I chose the S&P 500 Index starting point one month prior to passage because the market typically discounts the information beforehand as the bills work their way through Congress. I chose 6 months-post passage as the ending point because that's all the data we have for Obama's plan so far.
Bush: From March 2003 to October 2003, the S&P 500 went from 835 to 1034 or +23.8%.
Obama: From January 2009 through July 2009, the S&P went from 932 to 879 or -5.2%.
By way of comparison, I also reviewed the market returns a full year prior to these time periods and the results show a very similar situation.
The S&P 500 return under Bush 1-year prior was -26.2%, hurt by the internet bubble collapse, 9/11 and corporate scandals. Trillions of dollars in lost wealth.
The S&P 500 return under Obama 1-year prior was -35.9%, hurt by the housing bubble collapse. Also trillions of dollars in lost wealth.
Both presidents had very similar economic challenges, but the difference in market confidence inspired by the two stimulus plans couldn't be more stark. The market discounted that Bush's plans would return the economy to strong growth, while the market is discounting that Obama's plans will do nothing or even harm the economy's growth. I challenge people to offer an explanation other than what the market has already told us. It's time for Democrats to abandon their tax-and-spend approach and return to a plan that actually rebuilds individual wealth and business confidence.
Of course, Obama has a different view than the market - he says his plan is working great.”
Josh, a commenter at Biz Bogger said it best, “Why do we insist on calling Obama's plan an economic stimulus package. Clearly, it was never designed to stimulate the economy, but rather redistribute taxpayer dollars to Democratic constituents. It was merely called an ‘economic stimulus package’ to divert attention away from what it actually was and get it passed. Thankfully, since the Democrats called it an ‘economic stimulus package‘, it allows Republicans to compare the two even though it is really comparing apples to oranges. Your post demonstrates that Democrats know nothing about the economy, either that or they do and they want to destroy it.”