Politics are of course supposed to be separate from the difficult dealings of finance. But they are inextricably tied, and while some people are excited to admit it and see what it can bring, others are nonplussed. They wonder why the two are tied and actually rely on one another, and the answer is conservatism.
Conservatism is tied to Capitalism--the belief that anyone can achieve great things, become rich and prosperous with hard work, good investments, and little government intervention (whether it be through taxation or regulation.) So while we try to look at the markets as an objective indicator (something not influenced by personal opinion), it is very subjective, and the majority of those investors are looking to become true capitalists and are therefore subjective in their approach to investing (as they should be), but it causes the market, and by extension Wall Street, to become entirely subjective.
To properly reflect the liberal politics now governing the US, the markets of course are going to encounter some friction, will plummet initially before rallying on issues other than politics. Anytime there are two opposing bodies, initiatives or sides, there will always be friction/adversity. We must come to accept this and accept the market as not an indicator of the administration's benevolence or successes, but as the opinions of a group at odds with some of the core beliefs of the administration. The market and the majority of Wall Streeters (Capitalism incarnate) will always be at odds with liberalism because it, by definition, attempts to socialize and stifle rampant Capitalism.
It's all politics, but not in a political way, in an intelligence way. Therefore, we can't look at the market as something that is benevolent and the administration's work as malevolent. Instead, we must look at the market as a reflection of business, not of ideals, perceptions and approvals of the majority. Only a minority that is in opposition with the current liberal leanings of politics. So yes, CNBC, according to your first question, politics are affecting the markets, and that is why there was such a sharp decline after Obama came into office and after the stimulus bill was signed into effect. What you must also realize though, is that politics, and especially frictional politics, are essential to finding a common ground. For too long the highest-paid and most conservative of people were leading the market higher, and now that they have vacated the market, anticipating a bottom to reinvest, the market will go lower. While they fight back against the liberalism driving the market down, a bottom will eventually be reached (consensus, politically and fiscally), which will then drive the market upward again (what we've seen since March 9th). Eventually there will of course be retrenchments and bull market downtowns, but this is not a bear market rally. The prevailing politics are turning into a consensus instead of a head-to-head bull vs. bear, liberal vs. conservative, socialist vs. capitalist (not respective, of course) battle and jostle for position.
To their second question, is regulation good for the markets? I think my explanation of my answer to their first question satisfies that and is a pretty solid response. OF COURSE!
The market fluctuates in good times and bad times between a Type A and a Type B personality. Of course at times it will be free-wheeling, uncontrollable, and greedy, while other times it will be grim, pessimistic and annoyed. But one thing is for certain: it likes to know what the boundaries are so it can challenge them, bend or break them where available and appropriate without breaking the law (unless you're Madoff or Alan Stamford--IDIOTS!), and gain as much money as possible during the interim.
It's like a young child fighting back against its parents (and in a way, the market is the ID of our society: greedy, desirous, and unwavering): it needs to know the boundaries have been set and there are punishments in order for it to act accordingly. The previous administration tried to deregulate and offer up boundless possibilities to create growth and a strong economy, but the opposite eventually happened. For a few years it was easy-going freedom with endless capital and a strong feeling that nothing will ever change. Now, less than two years later, we're in the pits and the bottom of the bottom as the lack of regulation caused all these companies to defy the rules, and when the consequences came (ones that they either did not know about or disregarded), they were swift and strong.
Therefore, the market is shaped by the need for regulation and politics. It acts accordingly because it is basic, greedy, hungry and desirous.
You're welcome, CNBC.
As a side note, this link from Comedy Central, a video from The Daily Show, is pretty correct in its realizations of the Dow's true arbitrariness and capriciousness. It is not a gauge of politics necessarily, but a system set up to gauge myriad factors simultaneously both delayed and instant in order to present an overall opinion and financial outlet. Stewart puts it best in the video, and actually makes a beautiful case for what CNBC and Fox News do (and unfortunately, even CNN sometimes) when they place a stock ticker and/or Dow ticker beside or beneath Obama or a member of the financial administration (Bernanke, Paulson or Geithner) or political administration, and try to correlate the opinions and decisions expressed during their speeches with the Dow as if it were a general opinion poll or gauge or right vs. wrong. (Buzz sounds loudly...)
WRONG, people. It's not like the ticker presented during the presidential debates reflecting how audience members view a response (either positively or negatively). It does not reflect the general population in any way. Sorry, CNBC; try again.
|The Daily Show With Jon Stewart||M - Th 11p / 10c|
|The Dow Knows All|