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Obama Versus the S&P 500

 

 

If you pay any attention to business news, you’ve probably heard of the S&P 500.  Many people know it’s an important metric of economic performance, without having given much thought to precisely what it represents. 

Standard & Poor’s is the firm that has already downgraded America’s credit rating, a move its two largest competitors – Moody’s and Fitch Ratings – have warned they might well follow in 2013.  It’s a widely under-reported truth that many smaller agencies actually downgraded U.S. debt long before S&P did.

The S&P 500 Index is a list of five hundred heavily capitalized companies, selected from several key industries.  These companies are mostly – but not exclusively – based in the United States.  All of them are heavily traded, and widely held by American stockholders.  Here’s how Standard and Poor’s describes the Index:

The S&P 500® has been widely regarded as the best single gauge of the large cap U.S. equities market since the index was first published in 1957. The index has over US$ 4.83 trillion benchmarked, with index assets comprising approximately US $ 1.1 trillion of this total. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.

The S&P 500 is, therefore, a widely respected measure of American economic activity.  Its primary weakness in that regard is the requirement for high liquidity, meaning companies that don’t trade a lot of stock do not make the S&P 500, even if they’re large and important players in their industries.  Still, the performance of these five hundred companies is an important metric of overall private-sector health.

How is the S&P 500 doing these days?  Not well at all.  In fact, the Club for Growth put together an absolutely eye-popping chart comparing returns on investment for the S&P 500 during the third year of the last seven presidencies:

                Nixon, 1971 = 14.3%

                Carter, 1979 = 18.4%

                Reagan, 1983 = 22.5%

                Bush I, 1991 = 30.6%

                Clinton, 1995 = 37.4%

                Bush II, 2003 = 28.7%

                Obama, 2011 = 1.9%

That’s particularly grim news because the third year of a presidency is usually an exceptionally good year for the S&P 500.  There are many theories as to why, but the most obvious possibility is that presidents understand their re-election depends on a good economy, so they work hard to make Year 3 look good.  It would be unreasonable to use third-year performance as the sole measure of economic health, but it’s a troubling omen for the year ahead. 

This comes on a day when DNC chairwoman Debbie Wasserman-Schultz actually tried claiming, on the air, that unemployment has not risen during the Obama Administration:

Now, your first response upon seeing this might be laughter, or perhaps wonder that Wasserman-Schultz is allowed to cross the street without adult supervision, but remember: she’s the DNC chair, and she sits in on a lot of strategy meetings.  She probably overheard some Party spin doctors discussing ways of obscuring the Obama failure by manipulating statistics.  Under stress, it bubbled out of her as a blanket denial of reality.

Far more cunning operators are going to try this stuff during the campaign, and they won’t be as hilariously clueless as Debbie Wasserman-Schultz.  The GOP presidential contender in 2012 had better be capable of expressing more than numb surprise that anyone could believe the garbage Team Obama is preparing to shovel.

 

 

Written By

John Hayward began his blogging career as a guest writer at Hot Air under the pen name "Doctor Zero," producing a collection of essays entitled Doctor Zero: Year One. He is a great admirer of free-market thinkers such as Arthur Laffer, Milton Friedman, and Thomas Sowell. He writes both political and cultural commentary, including book and movie reviews. An avid fan of horror and fantasy fiction, he has produced an e-book collection of short horror stories entitled Persistent Dread. John is a former staff writer for Human Events. He is a regular guest on the Rusty Humphries radio show, and has appeared on numerous other local and national radio programs, including G. Gordon Liddy, BattleLine, and Dennis Miller.

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