President Obama's handling of the financial crisis brought about considerable angst among market professionals. The thought of greatly expanded government spending, even in the face of the near-Depression scenario that the United States faced in late 2008, was met with numerous editorials declaring the death of capitalism. More than a few conservatives accused the Democratic President of socialism, warning that the expanded debt burden would result in significant currency devaluation and sustained economic malaise.
Three months later, Mr. Market had made up its mind, rising nearly 65% from its March low.
Fast forward sixteen months. With an economic recovery seemingly in place, most developed nations have decided to embrace fiscal responsibility. And the same experts who warned that increasing public expenditures was an ill-conceived notion are saying the same thing about putting on the brakes.
This type of negative mojo resulted in a double-digit loss for stocks in the second quarter. Considering the reasonable valuations and buoyancy in corporate earnings, it may be as opportune a time to ignore the prognosticators as it was in 2009.
