Supply-side economists like rising stock markets, and they like limited government. As a result, they tend to assert that limiting government is always good for the market.
In the long run, economic freedom maximizes prosperity, and the health of the economy is reflected by the stock market, but that doesn’t mean good economic policy is always good for the Dow Jones Industrial average.
Remember how the stock market rallied around the bailouts? Drug company stocks were buoyed by ObamaCare. GE stock certainly isn’t hurt by bigger government. In short, corporatism can help the stock market — at least in the short term — while hurting the economy.
Joe Weisenthal at The Business Insider argues along these lines that Rand Paul’s win in Tuesday’s Kentucky primary is “a horrible sign for the stock market.”
let’s face it: Right now this economy is addicted to free candy from Washington DC. It may not be sustainable, and an economy addicted to government money is necessarily going to be undynamic, but corporate America has loved the stimulus and its shown up in stocks.
But American austerity is coming. Well, we’re not going to get a true “austerity budget” with massive chunks of spending taken off. But we are going to get a kind of austerity, whereby the here-and-there bailouts (states, teachers, jobs programs, etc.) will be a lot less forthcoming.
If you want a bailout, you better get it in the next few months.