Economic Outlook: What's up with stocks?

By ANTHONY HALL, United Press International  |  Nov. 19, 2012 at 11:04 AM
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Economic news from Europe and Washington has been encouraging of late -- relatively speaking.

So why have stocks been unable to find a purchase?

The recent decline began with third-quarter corporate reports that did not very often impart that warm and fuzzy feeling of profits beating expectations and wholly lacked that supportive giddiness that comes when investors suspect something big is about to turn a corner.

With the national propensity to forget what happened two weeks ago, the theme of late has been to blame the national election for the slump on Wall Street, forgetting that the downturn started a month before that.

But that isn't to say President Obama's re-election was greeted with a sense of euphoria, either. Until Friday's modest upturn, markets in New York were down 4.5 percent to 5.6 percent with only one other positive day posted since Nov. 6.

What did Obama's re-election mean?

Investors considered a four-year track record that included a sharp increase in regulation, a spotty approach to dealing with China and constraints put on the oil industry that is vital to our lifestyle and our economy.

And then there's this $16 trillion national debt. Who knew what would come of that. After all, the last time the White House and the Republican-controlled House of Representatives met on the budget battle field they created this peculiar "fiscal cliff," about which the best can be said is that nobody likes it. This is a budget that seems to have provided equal opportunity for squirming.

How could lawmakers have bungled things this badly? The answer is simple: The level of mutual vehemence in Washington in the summer of 2011 was at a peak. Republicans backed with vigorous right-wing Tea party enthusiasm, took a routine matter of raising the government's debt ceiling and decided to stonewall national debate.

For some, expectations for this year's budget talks could not have been any lower.

And what has happened since the election?

While stocks continue to slide, it has been announced that the United States is predicted to become the world's largest oil producer within the next generation -- something many Americans did not think possible. Imagine cheap gas and advances in solar power and strident expectations for fuel efficiency. Suddenly, what looked like a mess looks like a half-decent energy policy. Where did that come from?

A few smiles in Washington over the first round of budget talks should not fool too many, but Republicans took the national election to heart and began talking revenue before the dust had even settled. So, there's half a chance of progress after all.

In Belgium, European Commissioner for Economic and Monetary Affairs Olli Rehn announced last week there seems to be no need for Spain to undertake a series of self-destructive austerity budget measures, despite the likelihood of Madrid missing fiscal targets the European Union considers critical.

The path ahead for Greece is still strewn with serious potholes but Spain has a chance of containing the damage to its banking sector and leaving it at that.

Why is none of this very encouraging? Spain's economy is still in extremely dire straits. The U.S. economy is moving forward but it is still decidedly in the slow lane.

In international markets Monday, the Nikkei 225 index in Japan added 3.66 percent and the Shanghai composite index in China lost 0.66 percent. The Hang Seng index in Hong Kong gained 0.73 percent and the Sensex in India rose 0.16 percent.

The S&P/ASX 200 in Australia added 0.57 percent.

In midday trading in Europe, the FTSE 100 index in Britain gained 1.5 percent while the DAX 30 in Germany tacked on 1.94 percent. The CAC 40 in France jumped 1.85 percent and the Stoxx Europe 600 climbed 1.52 percent.

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