Ignoring the market because it’s an “opinion poll” shows dangerous ignorance
President Obama mischaracterized the stock market as the equivalent of a “tracking poll” in politics, a snapshot of the present at any given moment. It was a mistake, but an interesting one. Weekly Standard
What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics…
it bobs up and down day to day. And if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.
President Obama is wrong of course — the stock market is not a “tracking poll.” That would be a coincident indicator, and the stock market is a leading indicator. Though the stock market is not a perfect indicator of future economic events, it generally begins to decline two to four quarters before the start of a recession, and begins to rise about halfway though a contraction. As a leading indicator, the stock market is predicting that the Obama economic plan is not likely to work particularly well.
If Obama’s characterization of the stock market as a “tracking poll” were correct, however, the results might be even more interesting to interpret. John McCain led the tracking polls at the end of August. In mid-September, after the financial crisis hit, Obama began to lead in the polls and won comfortably in November. Take a look at the appalling performance of the Dow during that period to date; it’s been cut in half and it’s down by over 5000 points. If the market is a tracking poll, it’s one that the President should be paying close attention to, and by his own admission, he’s not. Good grief!
UPDATE — How would the media react if a Republican President downplayed a calamitous stock market?