Shortly after Congress passed the Budget Control Act of 2011 in August of that year, President Obama announced that he was going to pursue a job-creation program. The Budget Control Act is what created the fiscal cliff and sequestration issues we are dealing with now, and I'll come back to it momentarily.
The passage of the act, however, afforded the president time to implement a jobs program that was expected to be concentrated on infrastructure projects.
The expectation was that a jobs program heavy on infrastructure would be good for companies such as Caterpillar (CAT) and 3M (MMM), while the other budget issues would be negative for government contractors such as Lockheed Martin (LMT) and Northrup Grumman (NOC).
Since the budget act was passed and a jobs program announced a year and a half ago, there has been essentially no substantive change in anything related to either the federal budget or federal stimulus goals.
And yet the stocks of companies most affected by these issues have reflected little concern by investors about change of any kind being implemented.
Caterpillar is essentially unchanged since the jobs program was announced, and it has been trending around its current price in the year and a half since the program was announced. 3M has risen from about $76 to $105 quite steadily during the same time frame, but this does not appear to have any correlation to the jobs program, because that program never materialized.
The stocks of the largest government contractors whose business viability is inextricably tied to government spending have also reflected little if any concern by investors about the negative impact of a budget crisis. And these contractors have been dealing with it a rolling series of what have largely been media events concerning this issue over the past year and a half.
And yet their stock prices continue to grind higher. When the Budget Control Act was passed, Lockheed was at $73.56, and today it's at $89.01. Northrup was $57.53, and today it's $65.45.
These same patterns are evidenced more broadly in several other related stocks, for both infrastructure companies and government contractors.
Further, when the Budget Control Act was passed and the jobs program was announced, there was an expectation that the president would have to "buy" passage of a jobs program through Congress with a targeted tax cuts of some kind, and that those cuts would benefit retailers such as Wal-Mart (WMT) and Home Depot (HD).
The tax cuts never materialized either, but the stocks of these companies and many other consumer staples providers have continued to perform well.
Both companies' stock prices hit their lows at just about the time the Budget Control Act was passed in 2011 and they have risen steadily since -- Home Depot more than doubled, and Wal-Mart is up 50%.
So the question that must be asked is, does anything the federal government does or does not do on the fiscal side have any impact on the real economy or stock market?