Can we call this the “Obama bounceâ€? Yesterday, the president did something rare for a head of state. In the midst of another weeklong cascading tumble in the financial markets, President Obama suggested on Tuesday that investments have been so beaten down that “buying stocks is a potentially good deal if you’ve got a long-term perspective on it.†On Wednesday, the Dow Jones Industrial Average closed up nearly 150 points (or 3.6% to 6875). The S&P 500 and NASDAQ posted similar gains. Were investors actually listening to the president’s investment advice?
Certainly, there are other reasons the markets are on the move today. You don’t have to be hanging onto Obama’s every word to realize that some very good companies are trading at steep discounts when you consider their ability to weather the current economic conditions. There was also other news that may indicate that an economic turnaround is (far off but still) in sight. Challenger Gray & Christmas, for instance, said layoff announcements in February slowed from January’s pace. Granted, companies still issued 186,350 pink slips last month–that’s double the number from February of 2008–but this could be a sign that layoffs hit their peak in January.
Another positive sign–the Federal Reserve’s “beige book†anecdotal survey of the economy noted Wednesday that there has been some resurgence of consumer spending of late. Even so, the Fed doesn’t see an upturn coming until late 2009 or 2010. Government economists also pointed out two sectors that–thus far–have remained recession-proof: food and drugs. But all the news wasn’t entirely upbeat. In general, the Fed said that downward pressure on the economy continues to be a problem.
What’s interesting about Obama’s investing advice is that it differs from advice we’re hearing from other sources in the media and elsewhere–where the mantra is spend, spend, spend to jumpstart the economy.