Shocking news—only about 30% of Americans approve of the job President Bush is doing—putting him in close contest for all time most unpopular. MarketMinder has just two words in response:
We don't much favor politicians of any stripe at MarketMinder—believing heartily in the adage that the world "politics" derives from the Greek "poly" meaning "many" and "tics" meaning "tiny bloodsucking creatures." And presidents are the tick-iest of all! Ideology aside, George W. seems like a decent enough person. Family guy. Not in the habit of strangling puppies (that we know of).
We've said in the past, President Bush could cure cancer, and Congress would launch an investigation into why he didn't do it sooner. (Why the cover up? Is he in bed with big pharma? And where was Dick Cheney while Bush was "allegedly" curing cancer?) His challenge to Nixon (also not given to puppy strangling) for "Most Unpopular" should hardly be front page news. Yet, it is!
Disfavor for Bush Hits Rare Heights
By Peter Baker, The Washington Post
If you're George W.'s mom, this should make you sad (though, she has experience with unpopular presidents). If you're not, don't fret—presidential approval (or disapproval) historically hasn't been predictive of future stock return—there's no correlation there. Note: Bush's popularity has been dwindling steadily, yet stock returns have been healthily positive. In fact, his popularity hit high points just after 9/11 and the start of the war in Afghanistan—yet US stocks were down big in 2001 and even more in 2002! His popularity then told you nothing, and his unpopularity today tells you less.
It's not just W. who's so afflicted. Japan's president is less popular than ours (if that's possible), yet Japan's stock market's returned 5% (in local currency) thus far this year. The Japanese may be disenchanted with their president, but it's not reflected in their enthusiasm for stocks.
At first blush, it might seem intuitive that low presidential approval should translate into miserable stock returns. If folks hate the president, that's got to be because of economic matters, right? Not at all—George W. and Lyndon Johnson both had disapproval peaks over unpopular wars. Clinton was highly disliked over his Lewinksy-kerfuffle. Reagan enjoyed high popularity throughout most of his presidency, but got some heat over the Iran-Contra affair. Though history has treated President Truman well, he too suffered a 65% disapproval peak and lukewarm approval over his entire presidency—mostly because he grappled with his larger-than-life predecessor's overwhelmingly popularity. Yet . . . the US market was spectacularly positive nearly Truman's entire presidency!
Presidential popularity isn't dictated by reasons economic. Sure, it can be (see Carter, James) but it's hard to make the argument that the economy under President Bush has stagnated. Since taking the reins in 2001—in midst a mild recession and the outset of the 2nd year of a three-year bear market—his policies have largely allowed the dynamic US economy to right itself and thrive. Since the recession and bear market ended, we've seen record earnings growth, above-average economic growth, and are five years into a bull market that isn't done running.
This is not an argument in support of President Bush—it's simply to show that headlines about his unpopularity aren't likely to have a negative market impact. In fact—rather the opposite. Mr. Popularity isn't going to get any landmark legislation introduced, and he finally seems to be getting the hang of the presidential veto. Not much new legislation has passed this year and that isn't likely to change—which is consistent with our view the third-year of presidents' terms are outstanding times for stocks. (For more, see MarketMinder commentary "A Political Punch"—05/31/2007.) Little material legislation means reduced risk of wealth or property right redistribution—and markets love that.
So if you happen to like George Bush, send his mom a nice note, but don't fret the market outcome. His unpopularity and Congress's impotence should make this another great year for stocks.