President Biden has talked a lot about inflation, making sure Americans know he feels their pain. “Inflation is undermining the strength of many families,” Biden said at a union meeting in Philadelphia on June 14. “The jobs are back, but the prices are still too high. Covid is falling, but gas prices are rising. Our work is not finished”.
Biden has the difficult challenge of recognizing the problems in the economy while remaining upbeat about the outlook. But that doesn’t seem to extend to equity investors taking a beating right now, with the S&P 500 index down 24% from its January high and the NASDAQ off a staggering 33% from its November high.
Biden rarely mentions the stock market, unless someone asks him publicly. Last September, when stocks were still going strong, Biden told a White House event: “The stock market has grown exponentially since I’ve been president. You haven’t heard me say a word about it.
He said another word about it on January 7 this year, when he bragged that the stock market “hit record after record and record under my control.”
Three weeks later, as the stocks were starting to swoon, a reporter asked then White House Press Secretary Jen Psaki if Biden was worried. “Unlike its predecessor,” Psaki said, “The president does not look at the stock market as a means of judging the economy. Our measure of success is how real working families are doing ”.
Last month, as the selloff intensified, new White House spokesperson Karine Jean-Pierre said, “Nothing has changed in the way we view the stock market. It’s not something we keep an eye on every day. “
By June 13, when all stock market gains since Biden took office were gone, and then some, the White House seemed slightly more concerned.
“We know that families are worried about inflation and the stock market,” said Jean-Pierre. “This is something the president is really aware of.”
“The reason our stock market is so successful is because of me”
The obvious contrast is with President Trump, who often took credit when stocks were up and weighed even when stocks were down. During the first year of his presidency, Trump tweeted dozens of times about the stock market. In November of his first year, Trump said, “The reason our stock market is so successful is because of me.”
Trump has been a tireless bull, at least while he was in office. During a selloff in late 2018, Trump said he was “a really great buying opportunity.” He issued another buy recommendation in February 2020, just as the shares were entering a short-lived bear market. Trump’s outlook changed, however, once he was no longer there to push stocks higher. He said many times during the 2020 election that the stock market would collapse if voters elected Biden, and he reiterated this recently.
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The market did not collapse after Biden’s election. It has been growing for more than a year and peaking on January 3, 2022. But Biden critics / Trump supporters now argue that Trump was right, even though bear markets are a normal occurrence and something probably had to give up afterwards. extraordinary amounts of fiscal and monetary stimulus produced a “bubble of everything”.
The risk for any president who takes credit for the stock increase is that the stock falls too, and what do you say then? Biden has another problem with Trump, which he voiced in a June 16 interview with the Associated Press. “The biggest thing, when I got into this job, that I have the biggest frustration of the last four years, is that everything was built, built and organized so that the richest 1-3% of the population could do a lot. well. Literally everything else seemed to be an afterthought. “
Biden has clearly tried to focus more on low- and middle-income Americans through his appeal to unions; its focus on affordable housing; and its demand for higher taxes on businesses and the wealthy. But stocks aren’t just for the rich. More than half of Americans own stock, mostly in 401 (k) plans and other types of retirement accounts. Bear markets can even make retail investors more nervous than professionals, since typical workers don’t normally have hedging strategies or sophisticated ways to profit from the downturns.
The good news for long-term investors is that stocks have experienced an epic rupture since 2009, at least in part due to extensive help from the Federal Reserve, which has had much more to do with rising equity prices. asset values relative to Trump or any other president. Anyone who looks at their returns over a period of 5 years or more can still feel pretty good. Americans’ finances remain overall in good shape, so it’s not like a bear market in stocks will bring down the entire economy.
But Americans’ sense of well-being also depends on whether they are gaining or losing wealth, moving forward or falling behind. Equity portfolios contribute to the “wealth effect”, which makes people feel prosperous, confident and comfortable spending money. In this regard, the current bear market is undoubtedly contributing to the collapse of confidence, which in turn has pushed Biden’s approval ratings to the lowest levels of his tenure so far.
Should Biden show some sympathy for equity market investors? It’s hard to see how it could hurt. Biden may fear that out-of-stock Americans think he is pampering elites, while he neglects workers who have a hard time filling their trucks with gasoline. But many people worried about inflation are also disappointed by the collapse in stocks. One problem does not exclude the other.
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