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Stocks show Americans better off with S&P 500 cheap to world

By Whitney Kisling and Rita Nazareth, Bloomberg

September 17, 2012 • Reprints

Fed Stimulus

The gauge advanced 1.9 percent to 1,465.77 last week after the Federal Reserve said it will buy mortgage-backed securities in a third round of quantitative easing stimulus. The S&P 500 declined 0.3 percent at 9:46 a.m. New York time today.

Mitt Romney, the Republican presidential candidate, is making the economy the central issue for the November election by using Ronald Reagan’s 1980 campaign question, “Are you better off than you were four years ago?”

Republicans say the president hasn’t created enough jobs and that his fiscal policies have failed after the U.S. government’s public debt topped $16 trillion. Economists forecast U.S. growth at 2.2 percent this year and 2.1 percent the next, based on estimates from 98 forecasts compiled by Bloomberg.

Democrats point to the automotive industry’s recovery as evidence Obama’s policies sparked growth. They cite an improving job market during the last four years, with 96,000 jobs added last month, compared to 818,000 lost in January 2009.

Great Depression

Obama inherited the worst financial crisis since the Great Depression when he took office in January 2009. The S&P 500’s 82 percent gain since then is the biggest first-term rally for any president since Dwight D. Eisenhower from 1953 to 1956, data compiled by Bloomberg show.

White House spokeswoman Amy Brundage and Obama campaign spokesman Ben LaBolt declined to comment.

“There are a lot of economic indicators that signal the health of the economy -- from our record-high debt, unprecedented credit downgrade, stalled employment numbers, and the record number of people on food stamps and in poverty, all signs point to the fact that we are heading in the wrong direction,” said Romney campaign spokeswoman Andrea Saul. “Mitt Romney has a plan to strengthen the middle class and get Americans working again.”

Unemployment Rate

The S&P 500 has never stayed above 1,400 when the unemployment rate was this high. The first time the equity index reached that level was in 1999, when the unemployment rate was at 3.8 percent, the lowest in more than 30 years. As the gauge climbed to a record 1,565.15 in 2007, joblessness was still below 5 percent.

“It’s too much of a stretch right now to say that we’re better off than we were in 2008,” Ryan Larson, the Chicago- based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in a Sept. 12 phone interview. His firm oversees $250 billion in assets. “A lot of problems here in the United States and abroad remain and while we’re at multi-year highs, those multi-year highs have come largely driven from stimulus accommodation from central banks.”

The Fed said last week that it plans to keep interest rates “exceptionally low” through the middle of 2015 after holding the benchmark borrowing rate at near zero since December 2008. It introduced two previous rounds of bond purchases totaling $2.3 trillion in an attempt to revive the economy and boost asset prices.

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US Federal Reserve 8527Bloomberg 5254financials 2975S&P 500 2462stocks 2123Standard & Poor 2008equities 1689Economy 1513U.S. government 1118Barack Obama 909Goldman Sachs Group Inc. 864gross domestic product 748White House 506Obama administration 333Lehman Brothers Holdings Inc. 158Mitt Romney 108American International Group Inc. 81PulteGroup Inc. 59Ronald Reagan 58Russell Investments 45Fidelity Investments 34Sprint Nextel Corp. 29food stamps 27RBC Global Asset Management (U.S.) Inc. 17Expedia Inc. 17Ryan Larson 17DoubleLine Capital LP 13Jim Chanos 10Jeffrey Gundlach 10Stephen Wood 9Amy Brundage 8Dwight D. Eisenhower 7Abby Joseph Cohen 6Kynikos Associates 5Chris Hyzy 5U.S. Trust in New York 3Andrea Saul 2Ben LaBolt 1

Free Newsletter Modern Trader Follow

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