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State of the Union: Not Very Happy

Posted By Barry Ritholtz On February 7, 2006 @ 6:00 am In Politics,Psychology | Comments Disabled

I normally don’t "do" politics, except where it intersects with the Economy and with Markets.

As such, I expected last week’s State of the Union address to be a
non-issue. The President has little political capital left to initiate
any major new programs that are potentially Market moving; Its arguable how much he even had once he won
re-election. My read of it was that a) the electorate was uncomfortable
switching riders in the middle of a war; and 2) the alternatives were not
all that compelling.

As far as markets are concerned, the key element here is Sentiment: As
we have shown in the past, 75% of gains in the last Bull Market were
due to P/E expansion. Thats a purely psychological phenomenon.

The ongoing political risks to the market are: 

Tax Cuts — the stock market likes them short term, but the bond market is all too aware of the impact of deficits on inflation;

Foreign affairs — Iraq is a continued drag, both economically and psychologically, while the WMD development in Iran is roiling the oil market;

GeoPolitical — The Muslim uprising in Europe raises strong
questions about future  integration issues; Ongoing unrest could be
problematic for the EU; Colleagues in Europe — Amsterdam in particular
– claim this is merely the tip of the iceberg, and is only going to
get worse;

Boomer Issues — The failure to deal with the rising costs of Social Security and Medicare is an ongoing problem; The country does not want a vast overhaul — they want the programs funded. This will also be an ongoing market issue. 

 

click for larger graphic
Wsj_poll_20060130 [1]

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Complicating matters is the ongoing drop in the President’s approval ratings: The WSJ [2] noted: "PRESIDENT BUSH’S approval rating, according to various opinion polls, has dropped in recent months, but the decline is just the tail end of a steady drop since a high point shortly after the Sept. 11 attacks."

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Polling Data: President Bush Approval Ratings

Infobushpoll05 [3]

Courtesy of WSJ [4]

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Note: Each colored line tracks positive answers to each poll’s key question on presidential approval rating:

NBC News/Wall Street Journal: In general, do you approve or disapprove of the job that George W. Bush is doing as president?

Harris Interactive:
How would you rate the job President George W. Bush is doing as president – excellent, pretty good, only fair, or poor? (Approve comprises excellent and pretty good.)

Washington Post/ABC:
Do you approve or disapprove of the way George W. Bush is handling his job as president? Do you approve/disapprove strongly or somewhat? (Results are "net approval" responses.)

CNN/USA Today/Gallup: Do you approve or disapprove of the way George W. Bush is handling his job as president?

AP/Ipsos: Overall, do you approve, disapprove or have mixed feelings about the way George W. Bush is handling his job as President? (Results are "net approval" responses.)

 


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Sources:
Public’s Focus Is Health Care, Troop Cuts in Iraq [2]
Poll Shows Clear Demands That President Will Face For State of Union Speech
By JOHN HARWOOD
Staff Reporter of THE WALL STREET JOURNAL
January 31, 2006; Page A4
http://online.wsj.com/article/SB113866150512360250.html

HART/MCINTURFF Study #6060 [5]
NBC News/Wall Street Journal Survey
January 2006
http://online.wsj.com/public/resources/documents/poll20060131.pdf


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/02/state-of-the-union-not-very-happy/

URLs in this post:

[1] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/wsj_poll_20060130.gif

[2] WSJ: http://online.wsj.com/article/SB113866150512360250.html

[3] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/infobushpoll05.gif

[4] WSJ: http://online.wsj.com/documents/info-bushpoll05.html

[5] HART/MCINTURFF Study #6060: http://online.wsj.com/public/resources/documents/poll20060131.pdf

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