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Brian Wesbury is a smart guy.  But suggesting that the first press conference by President-elect Obama on Friday was instantaneously causing a sell-off in the stock market - as Mr. Wesbury did in an interview on Bloomberg TV - really just begs the question: to what do we ascribe the fact that the markets closed at session highs?

Why does the stock market do better under Democratic administrations - those inveterate spread the wealthers - than Republican administrations in recent decades?   I would argue it has more to do with the perception that Democratic policies are worse for appreciating share values than Republican policies.  This perception tend to get priced into to the market the more likely a Democratic presidential victory seems.*  When people realize that Democratics are not necessarily any better or worse for stocks than Republican policies, the undervaluation that occurred as "the worst" was priced into stocks, becomes its own reason to buy.

Then again, I've already started to see "Will Obama Inherit a Recovery?" headlines in the financial media, so maybe perceptions on this Democratic administration - and the timing of its arrival on the scene - will not prove as typical.  We will know a lot more on the other side of an ABC correction, should we get a continuation of the rally more than a few smart people anticipated a month ago.

*My favorite example of this was the mid-year correction in 2004 that began shortly before the Abu Ghraib revelations and ended shortly after the Democratic national convention in which John Kerry accepted the challenge of replacing the commander-in-chief very much in the middle of two wars.  We weren't in great spirits 2004.  But we weren't quite in a mood to mutiny.

 

 


 

 

 

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In your commentary on Brian

economics | November 12, 2008, 9:04 am

In your commentary on Brian Wesbury, it looks like you misunderstood. He did not say the market was down. He said the market did not really react either way, which was a reflection of Obama's message more than anything. Here is the actual transcript.

Liu: OK, so Brian, first of all, how do you think Obama did, and do you think he outlined what he needed to to gain the confidence of Americans?

Wesbury: Well, you know, I was watching the stock market and it didn’t have a huge negative reaction but it didn’t have a huge positive reaction either, and I think that really kind of describes the content, I mean we heard a lot of little things, you know, increasing unemployment benefits, maybe helping out auto suppliers and auto manufacturers, but really no major idea, no major plan, so we still don’t have an idea of how he will fully precede. I’m afraid that if we just do these short term kinds of things to muddle through that’s not going to get us back on track. And so at least I didn’t hear something today that was a game changer or something totally different so he needs some more time to sit down with people and talk this through.