More than other presidents, and to the endless frustration of economists, Donald Trump correlates stock market performance with the country’s economic health. However, economic experts believe that President Joe Biden is unlikely to measure his own performance against the rush of the stock market, and that the message is likely to resonate with an anxious population.
“I doubt Joe Biden sees the stock market as a barometer of his immediate success,” said Thomas Martin, senior portfolio manager at Globalt Investments. “He is focused on the health and well-being of Americans. He will determine success on how much he can flatten the curve, prevent deaths and get the economy back in shape. ‘
For much of Trump’s presidency, it was easy for him to claim credit for stock gains, as he was set for success, economists say.
“The economy was pretty good. Nothing was really out of balance, ”says Dan North, chief economist for North America at Euler Hermes.
Corporate expectations of lower taxes and fewer regulations have boosted business optimism. “It was the right environment to go up. The Biden stock market has a lot to do with it, ”said North.
The Biden stock market has a lot to do with it. ‘
Last March 9 and again on March 12, when the coronavirus began to take over the country, the shares have fallen so far, so fast that electronic “power outages” had to be caused to avert a complete collapse. That weekend, Trump tweeted: “LARGEST STOCK MARKET RISES HISTORY YESTERDAY!” while saying nothing to address or even acknowledge the country’s growing economic fears. The following week, circuit breakers were activated again on two different days when the shares continued to slide.
The CARES Act, coupled with aggressive action by the Federal Reserve to lower interest rates and add liquidity to the financial system, ultimately halted the fall of the market. In the ensuing months, Wall Street recovered, while Main Street suffered.
Experts believe this is just one example of why it was not only pointless, but foolish, for Trump to claim credit for a rising market. “In the investment industry, we generally know that the things that make the stock market move are many and complex. It is at most difficult to determine cause and effect, “said Martin.
Analysts say despite his self-confessed business acumen, Trump has squandered some of the momentum on the market. “He has done quite a few things to really hinder the progress of the stock market,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “The trade war with China was by far the most detrimental.”
That trade war was widely regarded as a failure: it led to a troubled ceasefire in early 2020, with little merit for U.S. consumers or businesses.
The new president, on the other hand, faces a heavier elevator. “President Trump is giving Biden an economy under control, still close to 10 million jobs from its pre-pandemic peak and struggling to avoid a double recession,” Moody’s Analytics chief economist Mark Zandi wrote in a research note earlier this week. .
“While you would say what Trump inherited was a ‘normal market’, Joe Biden inherits an extreme market,” Martin said. “You just got a new ball game for Joe Biden.”
Valuations are high, inflation is generally low, but shows that it has a lot of escalation, and market observers believe that Wall Street is apparently positioned for a best case in terms of Covid-19 restriction and immunity. Anything that does not meet the high expectations of the market can cause a turnaround in investor sentiment.
‘If you’re the average person, do you care if GDP was 3.2 or 3.4 percent? No, you care if you have a job. ‘
However, if the market does decline from its current high, economists do not expect Biden to react as its predecessor would. Unlike Trump, Biden is more likely to focus on keeping Covid-19 in check and getting the splashing labor market recovery going again. “The Biden government, I think, is going to focus more on the unemployment rate and jobs and less on what the real stock market can do,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “Right now, our immediate problem is still the coronavirus and the reopening of the economy.”
North said: ‘It’s going to take a long time to get the 10 million jobs back, especially since so many permanent businesses have been closed. This is what I believe the administration will focus on, and honestly, need to focus on. ‘
“If you’re the average person, do you care if GDP was 3.2 or 3.4 percent?” He said. “No, you care if you have a job.”