On Election Day 2008, as people anticipated Obama’s victory, global news agency Agence France-Presse (AFP), called the biggest Election Day rally since 1984 an “Obama effect.”
Look at the market now: The Dow Jones Industrial Average fell more than 3,000 points from 9,625.3 to 6,547.05 between Election Day and March 9. From Inauguration Day to March 5, the Dow fell 20 percent – the very definition of a bear market. Although the market rallied on March 10 by nearly 400 points, credit for Obama was noticeably absent from stories that evening.
Obama has been criticized from the right and the left for advocating policies that helped cause the markets’ dive, yet the networks shielded him from much of the scrutiny. NBC called it “partisan bickering,” and other network news programs just never mentioned that Obama had a bear market to call his own. ABC also gave Obama credit for a March 4 market rally during “Nightline” and “World News with Charles Gibson,” the day before the overall plunge hit bear territory.
Meanwhile, the financial press connected the dots.
Networks Safeguard President, While Others Fault Him
The network news shows didn’t it call it Obama’s bear market on March 5 despite the fact that the the Dow had fallen 1,353 points just since Inauguration day. In fact, during that period the Dow closed down 21 days and up only 14 days.
ABC’s Charles Gibson remarked that Wall Street didn’t seem impressed by
NBC’s “Today” featured debated the question, “does he [Obama] deserve the blame for this [Dow decline]?” But Matt Lauer downplayed the possibility by calling it “partisan bickering” in his March 9 tease.
While the networks sought to shelter the president from critics, cable and print media did not spare him.
“President Barack Obama now has the distinction of presiding over his own bear market,” Bloomberg’s Eric Martin wrote on March 6. The same day, CNBC’s Larry Kudlow said “Obama qualifies for a bear market,” and one of his guests, economist Jerry Bowyer agreed and explained why investors were reacting so negatively to the president.
“The recession is Bush’s of course, but this bear market has Obama written all over it. I mean its, the bear market has intensified under Obama. The market tends to react very directly when President Obama speaks or when Treasury Secretary Tim Geithner speaks. When they uh, when they uh, put their plans out. When Giethner announced his bank rescue plan we got a 400 point drop-off,” Bowyer said. “And why wouldn't we? Barack Obama is raising taxes on the two ways we make money in the stock market. There are only two ways you make money in the stock market. Either you get a capital gain or you get a dividend. And he is raising taxes on both of them."
Even Chris “I get a Thrill” Matthews, admitted during his March 8 NBC show the market was “reacting” to the president’s initiatives: “The big question, Trish, he wants to do these big things. He was elected on them. He wants to be a transformative president. Energy, health care, education. Why is the market, Wall Street, reacting so badly to his big plans?”
Media outlets like Associate Press and BusinessWeek were also asking the question. The business magazine’s March 5 cover story asked, “ Did Obama Cause the Stock Slide?” and asked “a wide array of investment professionals” for their input. “Many said the first six weeks of the Obama Administration have soured their outlook on the stock market.”
According to that BusinessWeek article, “The impact of Obama's proposals are easy to see in particular segments of the market. In a speech to Congress on Feb. 24, Obama pledged a "substantial down payment" on health-care reform. David Chalupnik, head of equities at First American Funds, points out that, since then, stocks in the Dow Jones U.S. Health Care Providers Index ( IHF) are down 16%. Health-care stocks had been a relative safe haven in the market, because medical spending tends to hold up even in recessions.”
Liberals like the “Oracle of Omaha” Warren Buffett, CNBC’S Jim Cramer, NY Times’ Paul Krugman and left-wing publication The Nation are criticizing Obama for his handling of the economy. The Nation called Geithner possibly “Obama’s biggest mistake.”
Obama’s One Way ‘Effect’
Shielding Obama, NBC’s Chuck Todd portrayed the White House as trying to “reassure” Wall Street. Todd described the panic as something the White House had “seen,” but not something it had contributed to.
“The White House has been confounded a little bit about their inability to speak directly to Wall Street and deal with some of the panic that they’ve seen with the markets,” Todd said. “So this week they’re gonna be dispatching key aides – Treasury Secretary Tim Geithner, Larry Summers, among others – to do public speeches, public media events, and they hope their words will somehow reassure those folks on Wall Street and maybe reverse some of this downturn at the Dow.”
The networks also protected Obama by not pointing out that Obama had earned the “distinction” of a bear market on March 5. But ABC was quick to praise him for a rally just the day before.
On March 4, the Dow closed up roughly 150 points and ABC’s “Nightline” and “World News” programs both credited the president with the rally. But even before the rally, “Good Morning America” was on the lookout for just such an “Obama effect.”
Citing Obama’s March 3 remarks – when he played stockbroker in a speech advising people to buy because stocks are a bargain right now – Chris Cuomo said on March 4, “Sure enough, the Dow is looking up this morning, for the first time after five straight days of losses. Obama effect? Who knows?”
“1-4-9 DOT 8-2. That’s what the Dow went up today, which at least was not down and could that be because of a president’s premise, which he posited yesterday, that the
The same night, Charles Gibson suggested it was Obama’s housing plan that “hearten[ed]” the markets.
“If you live in your house and are struggling with your mortgage, the government has got a $75 billion plan for you. And maybe, just maybe those $75 billion will bring stability to everyone’s home price. The announcement of details of how the program will work seemed to hearten the stock markets today,” Gibson said of the 150 point rise on the Dow.
Some media outlets did the same thing on Election Day 2008, when Obama’s victory prompted AFP to declare that “The economic downturn rapidly overshadowed the euphoria over the election of Democrat Barack Obama … the ‘Obama effect’ lasted only one day, as voters headed to the polls.”
AP wire service toned the sentiment down, but still gave Obama credit on Nov. 5 saying, “Stocks appeared set to hold on to their gains following word that Barack Obama had been elected president.”
Obama’s ‘Regressive’ Policies
Many of Obama’s critics, even some on the left, point to the impact of his proposed left-wing policies on health care, the environment, energy and taxes.
Larry Kudlow pointed out that specific industries’ stocks were suffering because of the Obama administration. Kudlow explained an onscreen chart saying, "Industrials and utilities suffering I think from the threat of cap-and-trade as well as higher prices for overseas down 31 and 21 percent. The threat of a government takeover of health care has caused the HMO/Insurance companies to lose 26 percent. The threat of price controls and foreign imports has caused the drug companies to lose 16 percent and machinery also laboring under the cap-and-trade threat – down 29 percent."
BusinessWeek also pointed out that health care stocks fell 16 percent the day of Obama pledged a "substantial down payment" on health-care reform.
John Merrill, chief investment officer at Tanglewood Wealth Management in
The market is a forward-looking indicator of the economy, according to CBS’s Priya David. And according to BusinessWeek, investors “are making a practical calculation that they [Obama’s policies] will hurt corporate bottom lines in the future.”
A Wall Street Journal op-ed from Michael Boskin also criticized policies for the market’s dive.
“It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis,” Boskin, an economics professor at Stanford University and senior fellow at the Hoover Institution, wrote.
Warren Buffett, an Obama supporter and adviser, told CNBC’s Joe Kernen on March 9 pointed out that cap-and-trade and would be a “very regressive” tax on consumers. In the same interview, Buffett criticized Obama for “muddling” the message over the economy and for losing focus.