An interesting article can be found here about the 3rd year of Obama’s 4 year term and the possibility of a stock rally. It seems that history shows (see chart below from that article) that the third year of each term for the Presidents Reagan, Bush Sr., Clinton, and Bush were good years for the market.
The author of the article speculates that the reason for this is because the first two years, a new President is trying to get his agenda enacted and is not concentrating as much on the economy. After the midterm elections he is then more focused on getting reelected which means he will do more things to boost his approval ratings and to boost the economy. A good economy going into an election means a greater chance of getting elected.
While the new Obama tax package was just passed one might argue that things are already happening along those lines. With investors and companies knowing that their taxes are not going to be raised for the next two years, things are already looking good for the business environment.
But wait a minute.
Didn’t Obama already throw everything he had against the wall trying to stimulate the economy in his first two years? What about a little thing called the Obama stimulus bill in the amount of 787 BILLION! How much more can he do to try to stimulate the economy? Seems to me like he’s got very little left and that new Republican House is not going to let him get away with other reckless spending like that.
No, Obama was trying his hardest to stimulate the economy in the first two years and he clearly failed. He gave away our tax dollars and flushed them down the toilet like all Democrats seem to do. Whatever happens from this point will be more of a result of the Republicans who are there to put a stop to all his shenanigans.
If there is an Obama stock rally in 2011, it shouldn’t be called that. It should be called the return to sanity rally.
Stocks sometimes go up on rumors and you have to be careful not to get sucked in. One of the worst stock market for dummies moves you can make is to buy a stock solely based on a rumor or speculation that you hear.
Earlier today, there apparently was a rumor that Apple might be looking to by Sony (SNE). That “news” even sent Sony stock up 3% in Japan on Tuesday and it probably was the reason the stock went up right at the open here in America as you can see in the chart below.
Apple has over 50 billion dollars of cash and there has long been speculation about what they are going to do with it. Many shareholders want them to start distributing dividends but so far Apple hasn’t done that. They have bought some smaller companies that were competitors of theirs or that had technology they needed but so far no major purchase.
The rumor was based on nothing more than an article in Barrons that perhaps Apple is setting up to buy a bigger company with all it’s excess cash. Sony might have been mentioned in the article and that was enough to start the rumor.
Stay away from rumors as that is a sure way to lose money. If you bought Sony stock early this morning you still have a good stock but you probably paid more than you should just because of all the unfounded speculation. Additionally, you now own stock in a company that you likely had no interest in until you heard the rumor. You can always sell it back but that is not a good way to invest. Always invest in things you know, not on what you think you know.