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Is market rising on Obama presidency?

Posted Aug 28th 2008 7:36PM by Peter Cohan
Filed under: Major movement, Forecasts, Good news, Indices, Economic data, Politics, Presidential elections, Housing

Many observers refer to the market as a forecasting mechanism. If so, today's 213 point rise could be a signal that investors anticipate an Obama win. I don't think today's reported 3.3% Gross Domestic Product (GDP) growth for the second quarter can explain the rise. Rather I think the market could be happy with the idea of taking a break from the failed tax cut and spend policies of the last eight years -- which have led to a record $490 billion federal deficit, a $9.8 trillion national debt, and the loss of $8 trillion in housing-related value.

Bloomberg News reports that GDP grew 3.3% thanks to a rise in exports to Europe -- still GDP growth was anticipated to hit 2.7% so today's figure -- which could be revised after the November election -- looked more favorable. Nevertheless, Bloomberg does not expect the so-called expansion to continue since the European economy is weakening and consumers burdened with falling home values -- the average home is down 16% -- and a tough job market -- will lead cut back their spending, which accounts for 70% of GDP growth. Bloomberg writes that "the number of Americans collecting unemployment benefits reached a five-year high last week."


Investors watching the Democratic National Convention this week are seeing that the prospect of ending the policies that have produced these economic results is at hand. Obama will cut middle class taxes to get this country moving again while investing in alternative energy so we can stop funding terrorism when we pay $3.70 cents to fill up our tanks. By ending the Iraq war, Obama will also help to reduce the budget deficits that have inflation roaring ahead at 14.4%.

Investors welcome the prospect of a healthier economy and see bargains in stocks. And there's nothing more American than that.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Tags: federal deficit, FederalDeficit, inthenews, national debt, NationalDebt, obama

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