November 7, 2007

The Dollar Should Stock Market May Be an Election Issue

On 19 January 2001, the day before Bush was inaugurated, the S&P 500 closed at 1342.54. As I write twenty minutes before today's close, it is at 1482.93. In recent years the annual standard deviation has been about 10%; historically it's been more like 20%.

There seems to be at least a one-in-eight chance (my estimates for various scenarios range from one-in-eight to seven-in-twenty) that Bush will leave the White House with the market lower than when he took office eight years before--lower in terms of a dollar which has plunged under his stewardship.

It's the economy, stupid. If the average citizen endures a recession or worse, it would intensify nostalgia for Clintonian prosperity--but how suitable is Hillary to cure a sick economy? Romney, on the other hand, has strong executive experience in the private, nonprofit and government sectors. Mitt's economic credentials are stronger than Giuliani's, and he seems a better choice than Rudy or Hillary to lead a turnaround. But if the Bush-Rove-Delay-Lott economic chickens are home to roost in 2008, how can a Republican, no matter how well qualified, be elected President?

Afterthought. Heaven forbid that the foregoing clears the way for a demagogue. A demagogic President would compound the damage while blaming Bush for the consequences.

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