When I was taught the “scientific method” long ago, I recall the arduous process of moving an idea from hypothesis to theory to principle. While I don’t have time to go through that lengthy process, I do have a hypothesis.
While the stock market invariably over-reacts, it over-reacts to different news, depending on where it is in the cycle. During bear markets, the stock market largely ignores political news and over-reacts to economic news. During bull markets, it largely ignores economic news and over-reacts to political news.
During bear markets, politicians can’t do as much damage to the stock market as they can during a bull market. Conversely, economic data is considered less of a risk during a bull market, leaving politicians as the primary risk factor.
Another distinction is that economic data can predict the future, while politicians cling to the past.
