PrintJuly 21, 2009
Is the Incredible Shrinking Economy Helping Obama? (updated)
Could the incredible shrinking economy be a short term boon to President Obama's poll numbers? Perhaps. This week's good "earnings news" will be next week's bad employment data.
Consider: Barack Obama's "index" in the Rasmussen Reports Daily Tracking Poll spiked up a tad today after several weeks of negative or flat movement. His strongly disapprove versus strongly approve is now -5 after being in the -7 to -8 range for most of the past few weeks.
So what gives? Certainly nothing related to Obama-care or Cap and Trade is helping. And I don't think he got a bounce from his All Star game "bounce" to home plate.
Of course, it could be a one day statistical aberration, though Rasmussen generally can massage those away.
I say it's the economy, stupid. Well, the stock market anyway. The economy's outlook is so scary that corporations have been on a cost cutting (read lay-offs) binge since November. They all have shrinking sales, but they have managed to cut costs at a rate greater than their sales have slumped.
Thus most who are reporting earnings this week are showing good profit numbers. Those good profit numbers have fueled a 7 day (and counting) run up on Wall Street. In other words, the very forces that are driving up unemployment are for this short period of time viewed positively.
But in the face of slumping revenues -- and most say the outlook going forward is not positive for top line revenues -- these profits will necessarily come down. You can only cut so much from costs. Sooner or later, someone has got to start buying something again.
And my theory is that the same is true for Obama's plus/minus in the Rasmussen tracking poll. When earnings season is over - and the "good news" of the corporate cost cutting starts to be viewed through the prism of rising unemployment - expect the Dow and Rasmussen to have "a correction."
Update: Rosslyn Smith writes:
He may be on to something. The market may have been oversold after election day as investors feared the results of Democrat control of both the White House and Congress. With Health Care and Cap and Trade perhaps stalling out, the market may be showing its preference for the prospect of more gridlock and less activism in government.
Update: Rosslyn Smith writes:
For a different theory, see Roger L. Simon at Pajamas Media.
He may be on to something. The market may have been oversold after election day as investors feared the results of Democrat control of both the White House and Congress. With Health Care and Cap and Trade perhaps stalling out, the market may be showing its preference for the prospect of more gridlock and less activism in government.
