Can the president’s words move the markets?…

In his Media Notes column this morning, Howard Kurtz again visits the notion that presidential speech can have immediate effects on the stock market. He is critical of FOX news for having run an enlarged stock ticker during Bush’s economic address last week. The clear indication of the FOX decision is that there exists an immediate cause-and-effect relationship between presidential speech and moves on the market. This is nonsense. But it is powerful nonsense created by the inherent biases of journalism and the television medium.
I find myself agreeing with Ari Fleischer, who said running the ticker was:

“a troubling new development that sensationalizes and distorts what makes markets go up and down. It suggests to viewers there’s a causal connection between a president’s speech and minute-by-minute market shifts, which is a misleading representation…It’s economic nonsense.”

Actually, there’s nothing new about it. All the cable news programs run tickers during news events, and viewers may easily make such cause-and-effect leaps as they watch. I pulled this example from a study I did of Clinton’s various apology speeches regarding his affair with Monica Lewinsky. Time columnist Lance Morrow (sorry, no hyperlink) experienced such a cause-and-effect relationship while watching Clinton’s prayer breakfast speech on television:

“Clinton performed miserably in his first public ceremonies of repentance, but last Friday, at the White House prayer breakfast, delivered at last a persuasive peccavi, mea culpa. It was fascinating to watch the President’s speech with a window at the bottom of the television screen showing the Dow Jones average moving like an electrocardiogram. The Dow was losing territory when Clinton started speaking, and rose steadily into the plus column as he went on.” (Morrow, Lance. “That Old Familiar Uncharted Territory.” Time. 21 Sept. 1998.)

Is this just a columnist taking literary liberties, or did Morrow really mean to suggest that the market moved immediately on the power Clinton’s words? I can see it now. Elmer and Louise are sitting at home watching a presidential speech, when Elmer suddenly blurts: “Sweetie, call our broker, ’cause we just gotta buy 1,000 more shares of Acme Widget!”

Events are ambiguous. Journalism is the practice of applying a coherent narrative structure to ambiguous events. That structure may include: plot, characterization, action (including a cause-and-effect sequence), climax, and denouement. With a 24-hour news cycle, the pressure to apply a coherent structure increases. Part of that structuring includes immediate response by pundits to say what it all means, i.e. explain (create) the elements of the narrative and the final moral. The FOX decision to run an enlarged stock ticker during the speech suggests that the president’s words have immediate impact and, by far more than implication, provides an immediate, disembodied commentary. Who need pundits when you have electronics?