NEW YORK — The election of Barack Obama offered the promise of a new set of fixes for the financial crisis and the economy, a do-over that might help nurse the stock market back to health.
Since then, the market hasn’t just gotten worse; it’s turned in its worst performance ever for a new president.
The Dow Jones industrial average has fallen 21 percent during Obama’s first seven weeks in office. Count back to Election Day, and the results are even bleaker: That afternoon, the Dow closed at 9,625. Now it stands at 6,547, a loss of 32 percent.
Is this the Obama bear market? Or a hangover from the Bush administration? Some investors blame the slow-motion crash on Wall Street’s disappointment with the government’s $787 billion stimulus plan, its seemingly endless bailouts and the lack of specifics on how to rid banks of toxic assets.
Others say Obama inherited a recession destined to become the worst since World War II. And they note the market was already in awful shape at the tail end of the Bush administration, down 44 percent from the market’s 2007 peak to Inauguration Day.
Either way, Wall Street has not rolled out the welcome mat for Obama. Stockholders have lost $1.4 trillion during the young administration.
“There’s not much evidence that anything is working,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “Investors are waiting to see some results from these grand plans, and they don’t see them yet.”
Market analysts usually play down the influence of presidents on the market but say this time could be different as taxpayer dollars prop up private companies and Obama’s proposed budget stands at $3.6 trillion, with a gaping deficit.
In this case, said Wachovia Securities chief market analyst Alfred E. Goldman, investors are saying “they have no confidence in the stimulus package doing much stimulation any time soon. And they’re greatly concerned about the size of the budget.”
On some of the most wrenching recent days in the market, it has been easier to connect cause and effect.
Now the Dow seems to drift lower day after day, with Wall Street waiting for clarity and selling in the meantime.
Investors want to know when and how the government will cleanse banks of bad debt and whether it will suspend accounting rules requiring companies to value assets at current market prices.
“We need the Obama administration to articulate what we can and we can’t do within the financial system,” said Kent Engelke, managing director at Capital Securities Management in Glen Allen, Va. “The longer that we don’t have a plan from Washington, the greater the damage will be.”
There’s no reading yet on how much the economy has shrunk under Obama, but other indicators are dire. Unemployment has jumped to 8.1 percent, the highest in 25 years.
