State of the Union: Not Very Happy

Tuesday, February 07, 2006 | 06:00 AM

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


Complicating matters is the ongoing drop in the President's approval ratings: The WSJ 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."


Polling Data: President Bush Approval Ratings


Courtesy of WSJ


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.)



Public's Focus Is Health Care, Troop Cuts in Iraq
Poll Shows Clear Demands That President Will Face For State of Union Speech
January 31, 2006; Page A4

NBC News/Wall Street Journal Survey
January 2006

Tuesday, February 07, 2006 | 06:00 AM | Permalink | Comments (8) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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Oh come on! Post some politics and you'll get more traffic. No one agrees on politics and nothing brings out more emotion. I'll start if off. lol.

Does anyone else feel conflicted about Bush? I truly believe he is a good guy and I think he really cares about people. That said, his leadership skills are awful.

Bush would be a better leader of the Chinese Politburo. His style is command and control. You are either with me or against me. He immediately polarizes the nation on every topic. He'd have been a good head of the East German Stasi. I did vote for him the first time because Al Gore made me physically nauseous with his elitism.

Good leaders find a way to bring all people on the team together. Good Presidents find a way to unite a nation under a common mantra or message. Ronald Reagan was the greatest President of my adult life. Peggy Noonan's book "When Character was King" exposes a man who knew how to win the political game. Give Tip O'Neill and the Democrats their due and work cooperatively behind closed doors to craft a policy all could live with.

Posted by: B | Feb 7, 2006 11:14:58 AM

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