Stock markets seem to not be sold on Obama

By Ben Steverman

updated 5:39 p.m. ET March 5, 2009

At least on Wall Street, the honeymoon is over for President Barack Obama.

Polls still show the President has strong popularity among the general U.S. population, and Obama continues to command power in Congress. But among investors, fairly or unfairly, there is griping that the new Obama Administration is at least partly to blame for the recent slide in stocks. Since Nov. 4, Election Day, the broad Standard & Poor's 500-stock index is off about 25 percent, and since Jan. 20, when Obama took office, the "500" is down 15 percent.

It's never easy to determine exactly why the stock market moves in a particular direction. Plenty of other factors have influenced stock prices since November. For example, the global economy has slowed further and the outlook for corporate profits has worsened.

But BusinessWeek interviewed a wide array of investment professionals, and many said the first six weeks of the Obama Administration have soured their outlook on the stock market.

It wasn't always so. On Nov. 21, word arrived that Timothy Geithner would be tapped as Obama's Treasury Secretary and markets rallied immediately. The S&P 500 rocketed 15 percent higher that day and the following trading session.

Stocks continued to climb into January, and even rallied in the week after the inauguration. "Hopes were too high," says independent market strategist Doug Peta. Too many were hoping the new Administration would have "this magic potion to solve our problems," he says. "That was unrealistic."

Proposals for a stimulus bill pushed infrastructure stocks to unsustainable heights. Caterpillar surged 39 percent from the market lows in November to early January. Since then, shares in the maker of construction equipment have tumbled back down again, falling 43 percent.

Many investors hoped Obama could start to solve the stock market's — and the economy's — biggest problem: the credit crisis. "It was a false hope," says Brian Reynolds, chief market strategist at WJB Capital Group, who believes there is "nothing the government can do to stop the crisis."

Others are more hopeful the government can ease credit conditions, but say the Obama Administration has bungled the operation so far. A Feb. 10 presentation of a financial-sector relief plan by Geithner was widely criticized. Stocks fell almost 5 percent that day.

Geithner was a "particularly poor salesperson back on Feb. 10," says Marc Chandler of Brown Brothers Harriman, who says he voted for Obama. "The Obama Administration has failed to get ahead of the curve."

A lack of details from Geithner disturbed investors, says Quincy Krosby, chief investment strategist at the Hartford. "Markets need certainty," she says. "The market has been sitting here waiting, waiting, waiting. That allows rumors and conspiracy theories to dominate."

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