I know that correlation is not causation, but… The stock market really started to drop almost exactly to the day that Obama retook the lead after the Republican convention and has dropped ever since, with notable drops on inauguration day and the day Obama signed the “Stimulus” bill.
What this coincides with is the realization that the Democrats would be increasing their hold in both Houses of Congress along with gaining the Presidency, and then seeing how they reacted once they had that power.
Finally, such economic gurus as Nancy Pelosi and numerous other Democratic politicians have been repeating the mantra about a 1.5 or so Keynesian multiplier for whatever the Democrats decided to spend money on, whether it was for family planning, building unneeded schools, a high speed train by Harry Reid’s land in S. Nevada, etc. This is the fundamental basis for the “stimulus” bill recently signed into law, to the tune of more than a trillion dollars, including interest.
I always found such a high multiplier for whatever was spent, regardless, to be incredulous. I think that the better economic view is that it is, often at least, less than one. My guess is that the forward seeing markets are viewing this economic theory of the ruling Democrats as I do – wishful thinking economics.
What is scary to me, and I would suggest to those markets, is that the Democrats in power in the country have stated a willingness to double down with another similar “stimulus” bill if this one doesn’t work, as many expect it won’t.
Also, how many out there with much money at risk truly believe that the Democrats in power won’t allow the Bush tax cuts to expire, esp. in view of the huge deficits now being created? That would, of course, greatly increase the cost of capital, at probably the worst time for the economy, through de facto tax increases on dividends and capital gains.
