It has been nothing short of triumphant. A two-week pop that has pushed the stock market to levels not seen since December 2007. The latest leg higher was capped off by Thursday's open-ended and historic stimulus measures from Ben Bernanke and the Federal Reserve. It's amazing how far we've come, given that this weekend marks the 4th anniversary of Lehman Brothers stunning collapse and subsequent filing for bankruptcy protection.
By some measures, the journey back from those early dark days of the recession and crisis has been nothing short of astounding. By others, it has been unrewarding, if not invisible. And so, with just seven weeks to go before the election, it seems an appropriate time to ask the most popular of political questions: Are you better off today than you were 4 years ago?
The answer, as my co-host Jeff Macke and I discuss in the attached video, depends largely on who you are and where you measure from.
If you're an investor, you're unquestionably better off today given that stocks are nearing a 5 year highs. While we have now rallied 120% from the lows in March of 2009, we are up only 20% from mid-September of 2008. By this measure, the lines on the field make all the difference as to whether you've been thrilled or killed by the market. After all, the performance of benchmark stock indexes varies widely from what investors actually achieve, especially since so-called little guys have been pulling money out of the stock market for more than a year.
You also need to look at the reasons behind the rally, and why the President's re-election campaign has yet to use the stock market gains as a talking point. By some estimates, the entire ascent has been made possible by the most accommodative Federal Reserve. In fact, a July study from the Fed's New York branch credited the nation's rate-setting panel with 80% of the "drift" higher in stocks. Which means, without Bernanke and his QE's and Twists and multi-year promises of extraordinarily low rates, you're looking at a flat market. There's also the sticky fact that Bernanke is playing from a weak point. He's easing to help along an economy that still can't do it on its own, especially when it comes to jobs creation.
Speaking of jobs, the then-versus-now analysis of the unemployment rate presents similarly inconclusive results, and again, the starting point makes a huge difference. If you use September as your base, 2008 saw the loss of 432,000 jobs and registered a 6.1% unemployment rate. Today, the base unemployment rate at 8.1%, is higher than it was 4 years ago and we're no longer hemorrhaging jobs, having added 96,000 new jobs last month. Sure that's improvement, but not the kind you campaign on as employment remains a real sticking point.
Oil and gasoline are another area where consumers may be feeling things differently. Again, a literal September 2008 vs September 2012 analysis of what crude oil has done in 4 years, shows that it has gone from $91 to $100 a barrel, with a huge plunge to $35 along the way. Gasoline prices track a similar path, meaning if you're literal in your 4-year litmus test, it's a non-event. However, if you're more thematic and simply look at the trend, you're apt to feel that gasoline is pretty expensive right now and probably miss those days 3 years ago when pump prices slid to $1.60.
The same can be said for housing, GDP, and sentiment; all of which can be made to look good or bad depending on your purview and time horizon. It's also one reason why the better-off test may not play as prominent a role this cycle for the presidential candidates, since the breadth of experience these past 4 years is so wide.
Taking in all of this into account, maybe consumer confidence should be the rightful arbiter of the collective mood? In a recent note to clients, Nick Colas of ConvergEx refers to confidence as "the true currency of economic recovery." While Ronald Reagan touched a nerve with his "Are you better off" quip, studies have shown that when it comes to retaining control of the White House, the Conference Board's consumer confidence index above 100 has near-perfect predictive powers. By that measure, the latest reading came in at 60.6, down a hair from where we were 4 years ago, and at the lowest level since November 2011.
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