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Why Does Wall Street Dislike Obama so Much? Non-Financial and Financial Equity Values Since 2007 Edition


A worker bee at a mainline investment bank told me last fall:

Back in 2008 Wall Street was split 40-60 Obama-McCain. Now it is split 10-90 Obama-Romney.

Why? It is not as though Wall Street has done badly under Obama. Stock prices are up and interest rates are down, so leveraged financial institutions long assets--as Wall Street inevitably is--have done very, very well indeed. The standard bargain that the Democrats offer Wall Street has held. It is:

We will try to tax you (and, given the power of your lobbying operation in Congress, probably fail to do so), but we will give you competent economic management in striking contrast to that offered by the ideologically-blinded wingnuts who are the Republicans.

SPX Chart  S P 500 Index  Bloomberg

That has been the bargain that the Democrats have offered Wall Street from the days of Hoover to Bush II, and when Wall Street has had a sense of its own long-run interests, it has taken the Democrats up on it. And it has been happy.

But not this time.

Why not? What is going on? What is there about 50% real increases in equity values over less than 3 1/2 years that is not to like?

C New York Stock Chart  Citigroup Inc  Bloomberg 1

A big part of it, I think, is that Obama was not just supposed to make things better: he was supposed to fix things--to bring things back to "normal". Things are certainly not back to normal for America's workers. And, while things are pretty much back to their mid-2000s normal for equity investors--an S&P of 1400 compared to 1500 in the summer of 2007--that is definitely not the case for financials.

MS New York Stock Chart  Morgan Stanley  Bloomberg 1

Investors in Bank of America have lost 75% of their wealth as of the summer of 2007. Investors in Morgan Stanley have lost 70% of their wealth as of the summer of 2007. Investors in Citigroup have lost 93% of their wealth as of the summer of 2007. If you were working for those organizations and had taken your pay in options--well, whatever bonuses you have gotten since the crisis started are almost surely much smaller than the losses you have taken on your options portfolio.

BAC New York Stock Chart  Bank of America Corp  Bloomberg 1

Obama did not fix things: Wall Street bankers today are a lot poorer than they were in mid-2007. And the Wall Street bankers think that Obama disses them. And the Wall Street bankers know that Obama wants to tax them.

This historical record strongly suggests that they will do much, much better if Obama wins a second term than if he loses to Romney. But Wall Street is not listening.

Doug Henwood:

Obama’s stock market: pretty good (if you care about that sort of thing): Republicans and business interests have been relentless in their whining about how B. Hussein Obama has the “job creators” cowering under a reign of terror, what with his socialist policies and hostile rhetoric. But how have the monied been voting their approval or disapproval in one of their favorite venues, the stock market?… Obama’s stock market is the third best, beaten only by Clinton’s second term and Eisenhower’s first…. Since the beginning of Obama’s term in office in January 2009, the S&P 500 is up 60%…. Adjusting for inflation, Obama’s score is three times the average.)… The 40-month average for Democratic presidents is 36%; for Republicans, 24%. Still, Obama’s 60% is nearly twice his party’s average….

[T]he notion that Obama has been “bad for business” is a hard case to make—not that it will stop it from being asserted…