The right and left both talk nonsense.
(The Journal, understandably, has backed off this line of argument. As investment advice, it proved to be spectacularly wrong: U.S. stocks climbed almost nonstop during the Clinton years, were rocked twice under George W. Bush, and have surged once again during the Obama presidency. The claim also fails to pass even the softest standards of common sense, as presidential decisions have little effect on the key drivers of stock prices--corporate profits and interest rates. Even today, though, the Journal sometimes cannot resist temptation.)
Much of the gloom, though, is president-free. The business press offers up plenty of reasons for fear during the Republican years, too. In the aftermath of the crash of October 1987, for example, which spanned the final year of Ronald Reagan's presidency and the first of George H.W. Bush's, many mainstream articles predicted that stocks would retrace the pattern of the Great Depression. I vividly remember the attention given at that time to Bob Prechter and his prediction that the Dow Jones Industrial Average would decline to a mere 400.
It is, in a word, marketing. Those on the right tend to be relatively old and wealthy, meaning that they have something to lose. For them, fear is good marketing. Fear not only gives the listeners what they want to hear, in a horror-film sort of way, but it also sounds sophisticated. If bliss lies in ignorance, after all, then misery lies in knowledge. Clucking at the foolishness of the masses is a fine way for an investment (or financial) advisor to advertise his worldliness.
The claim here is not that stocks are inevitably a sound investment, nor that U.S. stocks are currently underpriced, nor that the powerful rally of the past four and a half years will continue. They are not; they are not; and I suspect not. It is rather that the prospects of American businesses, and of their stocks, are better than is commonly thought. The bad news plays well, politically. The good news does not.
The Sky Is Falling! (Version 2)
If the right is susceptible to fears about losing its accumulated assets, the left is vulnerable to fears about the accumulation process itself--specifically, to claims that it is being cheated out of its retirement. This, too, makes sense given the constituency. The left is not only younger, and thus more engaged with preparing for retirement, but it's also more trusting of government solutions and less trusting of private enterprise. Thus, it's ripe to hear tales about wicked financial institutions cheating it out of its golden years.
And hear it does. I've covered this topic in several columns, most notably in reviewing April's PBS Frontline "expose" of the retirement industry and Helaine Olen's article "401(ks) are a sham" in Salon. Such critiques follow a consistent pattern: 1) an initial assertion that the United States is in a retirement crisis; 2) claims of high 401(k) costs; and 3) a strong sense of helplessness.
I dispute all three items. With the first, the left's narrative is that U.S. workers once enjoyed fat corporate pensions, but now that companies have abandoned the defined-benefit schemes and left employees to fend for themselves, it's all falling apart. Uh-huh. Fat corporate pensions for those fortunate enough to work for Fortune 500 companies, perhaps, assuming that they stayed at the firm their entire careers. For most, though, the good ol' days never were that good.
Consider the data from a 2009 Congressional report on the retirement income of Americans over history, covering the period from 1968 to 2008. Shown below is the mean annual income for those aged 65 or older at a given time, along with the percentage of those retirees who received pension income from a former employer, and, finally, the mean percentage of total income that pension income provided. (The pension figures are not shown for 1970, as these items were not collected prior to 1976.)