Duncan’s Economic Blog

The stock market is not the judge of policy

Posted in Uncategorized by duncanseconomicblog on April 2, 2009

Iain Dale writes:

The real story will be the reaction of the financial markets. If they blow a collective raspberry and stock markets around the world tank, then that will speak for itself, and no amount of Brown spin will be able to counter that.

Oh Christ…. Where to begin? Today, leaving aside that the (probably brief) upturn in UK house prices, markets are currently digesting a whole raft of data. The rate of decline of US auto sales slowing, better than expected manufacturing survey data in the States, the possible suspension of market to market accounting for banks, an ECB rate decisions, US jobless figures at 13.30 today, an ECB press conference at 13.30, corporate events, Latvia missing a payment to the IMF,, etc, etc.

Markets might go up or down, it might be caused by the G20 statement, it might not.

This is a stupid way of judging the success of any announcement.

I know Iain doesn’t like Quantitative Easing, but the markets liked that. Does that not make it correct? On the day of the PBR (with the VAT cut was announced), the FTSE 100 was up 9.84%! Presumably this was a good policy too.

Judging policy by the one day reaction of any market, especially volatile stock markets, is a ludicrous proposition.