Nate Silver: The Stock Market Is the Least of Obama’s Worries

Roundup: Media's Take

Nate Silver is a staticistian and blogger who writes the FiveThirtyEight blog for the NYT.

There’s some Twitter sentiment to the effect that today’s crash in stock prices is bad news for President Obama. That doesn’t seem like a terribly controversial conclusion — but I’m not so sure it’s true.

Let’s be clear: the economy is struggling, and that’s a gigantic problem for Mr. Obama. In my view, his chances of re-election have dropped from perhaps two-in-three as a couple of months ago to more like a toss-up as the economic numbers have deteriorated.

But is the stock market a concern for Mr. Obama above and beyond the economic fundamentals?

Certainly, markets have good reasons for pessimism on the basis of the recent numbers. And they may have been overvalued to begin with. But today’s crash, in particular, came on a relatively newsless day, and reeks, at least in part, of panic.

The paradigm case for an exogenous decline in the market — that is, one which is not well explained by economic fundamentals — is Black Monday, the Oct. 19, 1987 crash in which the Dow Jones lost almost 23 percent of its value for reasons that remain poorly understood by traders, economists, and mathematicians. Unlike many other crashes, stock prices did not rebound particularly quickly following Black Monday, instead recovering only a part of their value over the medium-term....

comments powered by Disqus