This post is a guest contribution by Paul Kedrosky*, market commentator and venture capitalist who also blogs about financial matters of the day on the Infectious Greed site.

Every time the president or his administration makes a major economic announcement, the Dow takes a dive. But are they actually related? Let’s go deep inside the numbers.

Stock markets hate President Barack Obama. The argument was made last Friday on television by columnist Fred Barnes, and you can expect to hear the claim again today if stock markets fall after the Obama speech to the nation last night.

Here is what Barnes said on Fox News last Friday: “Financial markets are a bet on the future in America, and right now financial markets are betting that the future is grim. When markets dropped 800 points since Obama became president, and 2,200 since he won the election, that is a vote of no confidence on his economic policies.”

Radio talker Sean Hannity repeated and expanded the claim on his radio show Tuesday. It required some selective ignorance on Hannity’s part, as, under the spell of Ben Bernanke’s testimony, the Dow was simultaneously re-tracing its Monday losses. Mind you, no one has ever accused Hannity of letting the facts get in the way of a strongly held view.

Nevertheless, Barnes and Hannity cite two data points in making their claims. First, markets are down 11 percent since Obama’s inauguration. Second, markets have tumbled on days when the Obama administration has made major economic announcements.

There is no denying that US markets have declined sharply since Inauguration Day. The Dow Jones Industrial Average is in fact off 11 percent since the eve of inauguration, which is awful. Given, however, that the current recession is more than a year old, and the most recent downward cycle didn’t somehow start the morning of January 20, we need to put the post-inauguration market underperformance in context.

Please click here for the rest of Paul’s article.

*Paul Kedrosky’s bio is here.

Source: The Daily Beast, February 25, 2009.

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