Today the Dow Jones Industrials Average closed above 13,050. This after being below 11,000 only 18 months ago and below 12,000 two months ago.
The DJI and the broader market are both generally viewed as leading indicators of the economy. Since we see a value this high in spite of oil prices at all time highs and the subprime mess still out there, that suggests major investors are essentially bullish on the U.S. economy 6 months to a year ahead.
It is impossible to overlook the political implications of this stock market rally. We are exactly six months away from the general election. If the economy begins to improve then, it will take a few months for the public to sense the improvement, meaning it will come too late to influence the election.
I can envision a replay of the economic situation at the end of George H. W. Bush's single term, where the upturn happened after the election. Even though it began before he was inaugurated, Bill Clinton got credit for the economic upturn that should have been attributed to Bush Senior. How positive this likely outcome will be for the eventual Democratic nominee is yet to be determined.
