Is the Economic News Bad, and Is It Obama's Fault?

The following was written some six months ago by a large mutual-fund management company, T. Rowe Price:

For the better part of the past two years. equity [translation: stock] investors have tended to downplay good news—such as the impressive recovery in corporate earnings—and fret over bad news, such as Europe's debt crisis, stubbornly high U.S. employment, and a host of other perceived risks.

This was written specifically with reference to stock market and investment concerns; but it strikes me that it's not only investors who seem to focus on the negative, on the bad news (and not just financial/economic/investment news).

It's often been said that the media tend to showcase the bad news; to my mind that may or may not be true. But certainly politicians like to seize on the negative aspects of the current domestic financial and economic picture. After all, they want to unseat an incumbent president and to do so, they will do everything they can to argue that things are not good, that they have not been good for three years (never mind that some of the current problems could more accurately be said to have originated under the previous administration), and that Obama is to blame.

The Price article continues, "So far this year, good news appears to be winning." And then they quote stock market indexes, which are measures of aggregate stock-market prices. The article goes on,

The market rally has been powered by stronger monthly U.S. employment reports, better economic news from China, and the significant liquidity boost to European banks from the European Central Bank's refinancing operation.

Yet, even as economic risks appear to be receding. . . the outlook for corporate earnings' growth is becoming less favorable. . . .[G]lobal earnings growth should slow to a still healthy mid-single-digit growth rate this year. . . .[T]he earnings slowdown is a natural result of the economic cycle. . . .We've now reached the point of the cycle where you would expect to see slower earnings growth.

The slowdown has been exacerbated by several things which include "an economic soft patch in the U.S. tied to a fiscal stalemate in Washington. . . ." So the very politicians who are criticizing Obama and blaming him for economic bad news are themselves contributing to that which they're blaming Obama for. And--maybe most importantly--things are not as bad as some politicians would have us believe.

Copyright © 2012 by Richard Stein