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Use and misuse of stock-market metrics

<p>The major U.S.</p>
Use and misuse of stock-market metrics
Use and misuse of stock-market metrics

The major U.S. stock market indexes have fared quite well lately -- they showed modest gains again today -- which reminded me of an editorial the Wall Street Journal ran in early March 2009. President Obama had been in office for about five weeks, and the WSJ decided it was time to blame him for the struggling stock market.

Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery.

As far as the paper's editorial board was concerned at the time this was published, the facts were simply irrefutable: investors got a look at "the unveiling of Mr. Obama's agenda and his approach to governance," and then the stock market fell. There was no doubt about the causal relationship.

Indeed, over the first seven weeks of the Obama presidency, the Dow Jones Industrial Average, just one of many Wall Street indexes, dropped from 7,949.08 to 6,547.04. For many conservatives, no other proof was needed to indict the White House's economic policies.

Karl Rove and Lou Dobbs made this argument, at the time, and so did Rush Limbaugh, Sean Hannity, and Fred Barnes. John Boehner also pushed the line, and it was one of Mitt Romney's favorite talking points for a while, too.

That was nearly three years ago. Now, under an administration conservatives are convinced is socialist, the markets have soared, and the S&P is up about 58%. The NASDAQ has reached heights unseen since the Clinton era, and the Dow Jones has roughly doubled in value since March 2009.

To be clear, the value of a stock market index is hardly the best metric for measuring the strength of the economy. Indeed, it isn't even close. But putting that aside, it's not unreasonable to expect a degree of consistency. If Wall Street doldrums were evidence of Obama's failures, should stock market gains be seen as proof of the administration's successes?

If not, why not?