Bespoke Investment Group asks whether the death of Osama bin Laden will be another turning point for U.S. markets. Regular readers of this blog will note that I'm generally a fan of Bespoke for the insightful way they crunch market data, but I'm not exactly sure what they mean by "another." If I understand correctly, they're pinning a lot of recent U.S. woes on the international terrorist -- and while I'm not about to defend the guy, this seems out of place.
Bespoke notes, correctly, that the decade since the Sept. 11 terrorist attacks has been a relatively bad period for the U.S. stock market and the U.S. dollar. The S&P 500 has risen 25 per cent since the attacks (with a lot of volatility in between, of course), while other major markets have vastly outperformed. Meanwhile, the U.S. dollar index has sagged more than 30 per cent.
"There is a view out there that because the years since 9/11/01 have been a relatively bad period for U.S. equities and the dollar, maybe now that we have caught the man behind those attacks, the next 10 years will be a little better," Bespoke said on its blog.
There are a few problems with this statement, not least of which is the term "caught." First, many observers have pointed out that bin Laden had been relegated largely to a symbolic status in recent years, so his removal from al-Qaeda might not necessarily speed up the U.S. withdrawal from Afghanistan.
More importantly, though, it ignores the fact that many of the problems facing the United States over the past decade have had little to do with the terrorist attacks. The economy continues to struggle with central bank missteps, which helped feed not one but two bubbles -- one in technology stocks, the other in housing. The bursting of those bubbles, along with a retrenchment in consumer spending, continues to reverberate through the U.S. economy, which of course weighs on the dollar and the stock market.
Osama bin Laden struck the United States at a vulnerable time for the country, but it seems ludicrous to pin all the country's problems on those attacks. And if bin Laden is not entirely responsible for the dollar and the stock market, how can he be the source of a turning point?