Why?  You ask.

Most markets anticipate the future and price goods, services, and securities with future conditions in mind.  Over the past month as the Stimulus was crafted and passed and signed, most markets have trended downward.  The Dow has dropped by about 10% below what it was on Inauguration Day.

Contrary to the headlines grabbed by the big risk-takers (day-traders, etc.) on Wall Street, most folks on Wall Street, indeed, most investors worldwide are a relatively sober group.  They make decisions after much study and deliberation.  When they worry over future uncertainties,  they tend to hold their money out of the market.  That means less buyers and falling prices.

What our economy needed was a clear message that well-thought-out measures were being combined to stimulate the economy.  Wall Street needed to hear  a message that would inspire confidence.  The way the bill was created and passed and many items included in the bill sent a far stronger message to Wall Street than the economic concepts that were employed.  Rather than inspire confidence, the message has been highly unsettling to Wall Street. 

Some thoughts on how to make investors more likely to get back in the market/to regain confidence:

1.  First and foremost, act with confidence and speak positively about the future.  This doesn’t mean that President Obama and his staff need to avoid speaking truthfully about the current state of our economy.  It does mean that they have to stop the current drumbeat of “Depression” and “unemployment” and “starving” that seems to be their daily litany.

2.  Using fear is a tool of politics.  Using hopeful words and showing confidence are the tools we need to stimulate our economic activity.  Stop using the “fear card” at every turn.

3.  Don’t underestimate the audience.  When you talk to investors about a plan for supporting our banking system, have specifics and know what you are talking about.  When Timothy Geitner presented the Bank Bailout plan he left far more doubts than he answered questions.  This single act, underestimating the importance of this message, underestimating the investor audience, cost the Obama Administration as much loss of credibility as the failed nomination of Tom Daschle.

4.   Talking only of Revenues and how we will be spending tax dollars leaves the other half of the story to the imagination.  Most investors read into the stimulus discussion “more government,” and “more spending.”  Show where you have plans to cut expenditures to match lower revenues.  Investors look at both sides of the ledger.  They want to see equilibrium, stability.

Until investors feel good about the direction of our government, expect more of what we have seen for the past year.