Thursday, February 24, 2011
Stock selloff starting to reflect reality of spending cuts
Look at the stock charts of General Motors and Ford, two companies that are very closely tied to personal consumption. These stocks peaked in early January when the new Congress was sworn in. GOP members of the House have been pushing deep spending cuts since then and look at what has happened to these automakers: GM has lost 15% of its value and Ford has lost 20%!
The action in these stocks suggests to me that the market is starting to appreciate--and fear--the spending cuts. This is a clear signal that overall demand in the economy could contract sharply.