Best Macro Forecast Anywhere

Larry Kudlow posts the chart above before observing "While there may be no direct causality, one can’t help but wonder whether the investor class hasn’t been disappointed with the shape of this election battle." It was nice of him to concede that there may be no direct causality here, but he then of course uncorks his explanation of why there was, in fact, causality. Basically, investors hate Democrats so when primaries happen including the Republicans-only Michigan primary, the markets go down. You can see why Fox Business News isn't getting any viewers. This kind of dogmatism may work as political commentary, but it's poison as actual economic analysis.

Comments

I guess the traders weren't able to anticipate that the primary would occur when it did.

Posted by efficient markets theory | February 6, 2008 3:30 PM

I'm not able to make a graph right now, but perhaps someone should post a graph showing the number of times the market went down on days that didn't follow a primary. I think you'll find those days outnumber the days selected by Larry K. After all, we are in a bear market, so any given set of days may correspond to stock losses. Or is Larry so daft as to suggest that stocks are tanking right now because Democrats might win an election?

Posted by freddiemac | February 6, 2008 3:31 PM

I guess the markets have no other reason to tank, like the sub-prime mortgage meltdown, the collapse this month of the service portion of the economy, the ballooning of the deficit. It's the primaries, stupid!

Posted by scott | February 6, 2008 3:32 PM

Going back the last hundred years or so, stock markets in the U.S. do dramatically better under Democratic presidents.

Posted by Joe | February 6, 2008 3:35 PM

Wouldn't you expect the market to react the day after the elections, given that they all happen in the evening?

Posted by Anonymous | February 6, 2008 3:39 PM

Matt, you need to get cable. Kudlow's show is on CNBC, not Fox.

Posted by pinson | February 6, 2008 3:42 PM

This is an extremely dishonest way to manipulate the data. Notice that he used the 'day after' for Iowa and South Carolina, but the 'day of' for Michigan and Super Tuesday. That's because if he was actually consistent, he thesis would evaporate. Also for the 'day of', how are the markets supposed to be reacting to the primary when the earliest the exit polls leak is around 5PM EST and the markets close at 4PM EST?

Posted by Bo234 | February 6, 2008 3:42 PM

I love how he even brings up the casuality issue. This is his theory. He hypes it all the time. He only appears on NRO to talk about it.

He is an ignorant thug and it is telling that National Review associates with him instead of Republican-leaning economists like Greg Mankiw, who could offer some real economic analysis. The poverty of the Conservative movement comes into view. No wonder William F. Buckley said in 2001 that if he were a young inconoclast today he would be a Communist.

Posted by david | February 6, 2008 3:47 PM

Kudlow's analysis is positively Krugmanesque in its bad faith and poisonous partisan bias.

Posted by y81 | February 6, 2008 3:48 PM

When I clicked that Salon link, instead of the usual Day Pass add (annoying but understandable), it took me to my MyYahoo page, added Salon content to the top and asked me if I wanted to keep it.

Creepy and tres annoying.

Posted by jacob | February 6, 2008 3:53 PM

There is a reason why he is called Krudlow, even in financial blogs.

Posted by Joshua | February 6, 2008 3:53 PM

Notice that he used the 'day after' for Iowa and South Carolina, but the 'day of' for Michigan and Super Tuesday.

And weren't there two South Carolina primary dates? And weren't they both on a Saturday? (Or do I have this wrong?) I don't think the markets went anywhere on either Sunday.

Posted by RSA | February 6, 2008 4:11 PM

Kudlow is just an epic idiot. Every market trend is tied to partisan politics, and especially the war in Iraq.

Posted by Sam | February 6, 2008 4:12 PM

Perhaps investors are largely Republican and any time there is a primary, they look at their candidates and think "Oh, GOP, thy name is...

"My name is Ozymandias, king of kings,
Look on my works, ye mighty, and despair!"
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

Posted by piotr | February 6, 2008 4:49 PM

"Matt, you need to get cable. Kudlow's show is on CNBC, not Fox."

Pinson is right, Kudlow's not even on Fox. Perhaps this was a deliberate attempt on the part of Matt to fight ignorance with ignorance?

In any case, rather than looking at the broad market, it would be more salient to look at the performance by sector. How is the pharma sector reacting to the prospect of McCain ("they're evil") versus a Democrat? It seems an enemy of the industry is likely to get elected next year.

Posted by Fred | February 6, 2008 4:52 PM

I've seen conservatives claiming that the big losses in the markets didn't truly happen until Fred Thompson dropped out. Hilarious!

Posted by Clark | February 6, 2008 4:55 PM

What makes this even funnier is that he thinks the market reacts to the outcome of the primaries as if it would be surprised that Hillary or Obama would win a Democratic primary. The markets adjust to new information. And the fact that one of those two would win a primary is hardly ground shaking (esp. since Edwards was the least business friendly candidate).

Posted by Mo | February 6, 2008 4:58 PM

My weight varies by a similar percentage day-to-day. If movement like that calls for a causal explanation at all -- a fluctuation that size is probably too small to rule out randomness -- it's likely something trivial.

Posted by CJColucci | February 6, 2008 5:22 PM

Is Kudlow doing the Peruvian nose candy again?

Posted by Joe Klein's conscience | February 6, 2008 5:24 PM

That has got to be the ugliest visual explanation of a trend I've ever seen. I've seen grade schoolers come up with better graphs charting lemonade sales. A note to people who want to be taken seriously: resist the urge to use every color in the Excel graphs palette.

Posted by In Vino Veritas | February 6, 2008 5:46 PM

Considering that Mr. Kudlow never saw a stock he didn't want to tout, nor an economic indicator that proved, completely proved that the stockmarket was just about to go stratospheric, I think we can put Mr. Kudlow's politico-economic analysis in the same category as other things that get dumped in the toilet.

Posted by grumpy realist | February 6, 2008 6:16 PM

Somebody should make Larry the K read "Does the Stock Market Prefer Republican Administrations?" at http://www.frbsf.org/econrsrch/wklyltr/wklyltr98/el98-19.html

Over the years, stock analysts have suggested that the market prefers Republicans in the White House. This apparently arises from the view that Republican administrations are more favorable toward business than Democratic administrations. Most studies attempting to document this have focused on the stock returns around elections, and find weak evidence for this in the behavior of the stock market. In this study, we examine the returns on the market over the Democratic and Republican terms in office from 1871 to 1997. We find, contrary to earlier belief, that there is no support for returns being different under one political party versus the other. The old adage that the market prefers Republicans is not evidenced. On the contrary, the evidence indicates a slightly, but not statistically significant, higher returns during Democratic administrations.

OOPS!!!

Posted by majun | February 6, 2008 6:59 PM

Dude, if only Kudlow's inference were true! I'd love to see a Democratic party that put the fear of God into Wall street. Alas, that party died a long time ago. It is so dead that Dems, in a united Pavlovian reflex, will always dig out the fact that the stock market goes up under Dems - a stock response when the zombie GOPers like Kudlow try to insinuate that the Dems won't cheesily block taxes to hedge funders, shuffle money to financial speculation, and in other ways serve as eager little Igors to plutocratic Dr. Frankensteins. This is the party, after all, of Rubenomics.

Hell, under Clinton, NASDAC went 5000 - wow, that worked out great, didn't it?

Posted by roger | February 6, 2008 8:19 PM

Seems to me if you sampled any random four or five days this year you'd get those kind of numbers.

Posted by Matt | February 7, 2008 12:34 AM

Matt,

It's been ten hours since you posted this whopper, blaming Larry Kudlow's political bias for Fox Business News's paucity of viewers, even though Kudlow works for CNBC, not Fox. Time for a correction?

BTW, one reason why Fox Business News has crappy ratings is that not everyone even gets the channel. I've got the Dish Network package with 150 basic channels, and Fox Business isn't one of them (Fox News is, as are CNBC, MSNBC, and CNN though).

Posted by Fred | February 7, 2008 1:39 AM

"What makes this even funnier is that he thinks the market reacts to the outcome of the primaries as if it would be surprised that Hillary or Obama would win a Democratic primary. The markets adjust to new information. And the fact that one of those two would win a primary is hardly ground shaking (esp. since Edwards was the least business friendly candidate).

Posted by Mo | February 6, 2008 4:58 PM"

Very true. It's not like we were all surprised by some nationwide write-in campaign for Kim Jong-Il.

Posted by Reality Man | February 7, 2008 8:50 AM

BTW, one reason why Fox Business News has crappy ratings is that not everyone even gets the channel.

The other reason is that their post-market show is set in a bar and has featured strippers as guests.

Posted by daveNYC | February 7, 2008 5:32 PM