The Obaman Markets

[wbcoleman]

Five months following the reelection of Barack Obama, the equity markets closed today at all-time highs.  The S&P 500 rose 10% in the first quarter, the Dow Industrials are up 11%, the small-cap indices even more.  Oh, by the way, debt markets also remain near their highs, meaning that interest rates are at record lows.  Given that O is poison for the economy, how are we to understand these facts?

[Ted S]

Sugar high?

[wbcoleman]

Sugar high?

Seriously!  The markets don't lie..... do they?

[Ted S]

You and I both know that there is a long history of bubbles.  Most recently the real estate bubble and the dotcom bubble.

I think the biggest problem is that we (the govt) didn't let the last bubble pop.  As soon as it started to rapidly deflate in September of '08 Bush and Obama did everything they could to keep it inflated. Stimulus, bailouts, virtual zero interest rates for years-on-end, the printing press churning out $80B/month in the endless QE3.  In my opinion the economy now is an illusion, a dangerous illusion.

[wbcoleman]

You and I both know that there is a long history of bubbles.  Most recently the real estate bubble and the dotcom bubble.

I think the biggest problem is that we (the govt) didn't let the last bubble pop.  As soon as it started to rapidly deflate in September of '08 Bush and Obama did everything they could to keep it inflated. Stimulus, bailouts, virtual zero interest rates for years-on-end, the printing press churning out $80B/month in the endless QE3.  In my opinion the economy now is an illusion, a dangerous illusion.

While it may very well be the case that the market is being propped up by the Fed holding interest rates near zero, it is still true that (1) the markets are not overvalued by any recognizable measure, so it's hard to call the rally a bubble, and (2) when O was reelected the market had already been rallying since March, 2009, so the prospect of four more years of him could have had an effect.  And it did..... for about two days!