Wall Street to Obama: Give Us a Little Bit of Hope
Wall Street will be looking for a little bit of everything from President Obama's speech to Congress tonight—at least a smattering of detail but a whole lot of enthusiasm that there's hope in sight for the battered economy.
"What I would love to hear is something that sounds a little bit more like his campaign speech in terms of relative optimism," says Diane de Vries Ashley, managing partner of Zenith Capital Partners in Coral Gables, Fla. "I personally feel that it's time for a little bit of a lift."
Obama delivers the speech against a backdrop of gloom, underscored by a 13 percent drop in stocks since the president took office more than a month ago—though the market posted a sharp gain Tuesday. At the same time, Obama has come under criticism for being too dour when painting a picture of the nation's economic straits and the prospects for the future.
For Chip Hanlon, Obama is much like a top-shelf stock that has seen some of its luster fade amid the credit crisis.
"Over the last month the expectations of him have come down a lot," says Hanlon, president of Delta Global Advisors in Huntington Beach, Calif. "When he was inaugurated he was probably a lot like a stock that had a big run and wasn't priced for a mistake—it can't afford a blip in its quarterly earnings report. He's been sold off a bit. He has a chance to surprise to the upside."
But few expect the speech, sort of a quasi-State of the Union presentation, to be a big market mover.
A slew of negatives on the economy and the markets, coupled with a growing sense of unease over a lack of specifics in the new government's plan to attack the problems, will necessitate more than a good speech to begin a recovery.
"I don't think it's a mistake or a coincidence that the market has been selling off since the day he was elected and been selling off even more steeply since the day he was inaugurated," Hanlon says.
"The market rightfully disliked and distrusted the last president, but the market has sensed that we may have jumped out of the Bush frying pan and into the Obama fire."
State of the Union-type speeches are usually long on rhetorical flourishes but lacking in real details, a problematic trend for a White House looking to convince the public that it does have a solid plan towards recovery.
That has led to a bit of hope that the president unveils at least some specifics tonight on what he plans to do to rejuvenate the economy.
"Everybody on Wall Street is looking for details. That's been the real issue with the stimulus package," says Nadav Baum, managing director of investments for BPU Investment Management. "It's just too vague to say, 'we're going to throw "x" amount of dollars at this.' Markets are always looking for a degree of certainty."
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Among the specifics Baum would like to see is an end to talk about bank nationalization. For Hanlon, it would be a suspension of mark-to-market accounting rules.
Though he's not optimistic of getting his wish, Bruce Fenton, president of Atlantic Financial in Norwell, Mass., would love to hear Obama say he's abandoning the bank bailout altogether.
"There doesn't seem to be any direction from this administration or the last one on what these multi-trillion dollar plans are going to accomplish," Fenton says. "Unless he announces something completely shocking and radical it's not going to have any fundamental effect on the markets."
In fact, Fenton thinks Obama should be purposefully vague.
"If I were to advise him on his first day in office I would have said take a lesson from Jeff Bezos (CEO) at Amazon and under-promise and over-deliver," he says. "People have a short memory. This problem preceded him but in a year or two people will forget that and they'll blame the man in power. It's going to be pretty hard to deliver anything in this economy."
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What most people may look for, then, is just a guarded bit of optimism that there's hope on the horizon.
"We have enough bad news out there. We need the positives," Baum says. "My world is great—my job is tough. Dealing with my clients' anxieties is brutal, but this too shall pass."
But unless Obama returns to his normally positive demeanor he'll continue to face criticism on Wall Street, though some caution against drawing too quick of a conclusion on the direction in which the new president will take the country.
"It's too early to think of disappointment," says Ashley, of Zenith Capital Partners. "God, 36 days in office when we're stuck for another four years--please, let's not go there."