The Stock Market isn’t Everything, but It is Something
The stock market isn’t everything. While watching its movements provides a sense of immediate gratification for the media, the effects of its regular ups and downs has on politics are fairly small. Only about half the country owns stocks in some form and your average 40 year old doesn’t vote or really change their behavior based on whether or not their IRA has risen or fallen a few percent over the past few months.
That said when the Dow is down roughly 1,500 points in less than a month; so we are talking about something else entirely. Unlike a modest fluctuation that most people ignore, a huge drop like this one can have a substantial impact on consumer confidence and politics.
This level of drop, unless there is a very quick recovery, can materially change how people live their lives. Millions of people are noticeably less wealthy than they were just a few months ago. Most politically dangerous for President Obama is that the people who are likely losing big as a result of the stock market drop are the well to do people who, have until now, fared fairly well during the recession.
Many people near retirement age are going to need to seriously re-think their plans and spending habits now that their retirement accounts have lost so much value.
A drop like this will also have ripple effects through the rest of the economy, impacting people who don’t even own stocks. As relatively recent retirees, as well as those near retirement, decide to pull back on their spending due to this loss of wealth, there will be reductions in demand for goods and services at all levels.
While the stock market isn’t everything in politics, or the economy, it is still an important component. If a huge number of people lose enough net worth to force a change in their lifestyle, that is a major political problem for President Obama. People are unlikely to support a president if they feel they have become poorer under his leadership.