Second Terms

The first four years of Obama were very bullish for the stock market. The S&P 500 rose 66% from January 2009 through October 2012, using monthly averages of daily closing data. That compares very favorably to the 50% average of the first terms of the past 11 presidents starting with FDR. The S&P 500 rose 16% during the second terms of the past six presidents who were reelected.

Yesterday’s 2.4% drop in the S&P 500 instantly discredited the widely held view that the initial response to an Obama victory would be bullish because the Fed would remain free to pursue QE3 for at least another four years. Fed Chairman Ben Bernanke is now likely to be reappointed in early 2014 for another four-year term if he wants to keep his job. If not, he’ll be replaced by a like-minded successor. Today’s WSJ lists the usual suspects who would make good Bernanke clones, including Janet Yellen, Don Kohn, Roger Ferguson, Alan Blinder, and Larry Summers. So why the Bronx cheer from investors?

Today's Morning Briefing: Nothing to Fear, But… (1) The meaning of life: A full tank of gas. (2) Bully for Obama. (3) Bernanke’s clones. (4) Is Washington running on empty? (5) The Thelma-and-Louise scenario. (6) ObamaCare’s unintended consequence. (7) Why do Republicans coddle rich Democrats? (8) Apocalypse now, postponed, or never? (9) Europe’s slippery slope. (10) Fretting about revenues. (More for subscribers.)