Friday, July 24, 2009
Hate to say it but Obama’s disastrous press conference last night is a big contributor to today’s roaring stock market. The Dow opened strong and is now up over 200 points, continuing a very bullish rally that is breaking new high ground for shares this year.
Politics is not everything, but I believe that the shrinking probability of a new government insurance plan that would lead to nationalized health care -- along with the demise of cap-and-trade that would nationalize energy -- is very bullish for stocks.
Hat tip to Bill Kristol for the phrase “stocks and cops,” that latter of which were attacked by Obama last night. It looked real bad. In fact his whole garbled, inconsistent, and baffling defense of health care looked real bad. The president’s polls have been falling, especially on his policies. And markets see the possibility that free-market capitalism will live to see another day.
Of course, there are a lot of positives going on inside the economy and markets. Earnings continue to surprise on the upside and a profits bottom following a nasty two-year decline is upon us.
This morning, the weekly jobless-claims figure -- a key leading indicator of future employment -- did rise 30,000. But that does not erase the near 100,000 downward spike on a four-week moving average. The chart has gone from 660,000 claims to 566,000. It could well mean that businesses cut too many jobs in the first half of the year. Planned layoffs are falling, and the July jobs figure may be better than we think. The unemployment rate might actually level off.
Meanwhile, Ben Bernanke is signaling an accommodative Fed policy for as far as the eye can see. And in the money and bond markets, credit-risk spreads have now fallen back to the pre-Lehman levels of late last summer. Economist Joe LaVorgna thinks stock prices could go back to pre-Lehman levels, too, which would be about 1,250 on the S&P -- nearly 30 percent higher than today’s 977 level.
I’m not predicting a return to the all-time S&P high, which was over 1,500. There are still too many government threats to free-market capitalism emanating from Democratic Washington. But the political tide is clearly turning for the better. And so are the economic stats. If the July employment report wipes out some of the negatives of the June report, this market could really roar.
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