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More than other presidents, and to the endless frustration of economists, Donald Trump has correlated stock market performance with the country’s economic health. However, President Joe Biden is unlikely to measure his own achievements by the whirlwinds of the stock market, economics experts say – and that 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 assess success by its ability to 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 market gains because it was designed to be successful, economists say.
“The economy was in pretty good shape. Nothing was really out of balance, ”said Dan North, chief economist for North America at Euler Hermes.
Business expectations for lower taxes and regulations have fueled business optimism. “It was the right environment to ride. Biden’s stock market has a lot going against him, ”North said.
Biden’s stock market has a lot going against him. “
On March 9 and again on March 12, as the coronavirus began to invade the country, stocks dropped so far, so quickly, that electronic “circuit breakers” had to be tripped to prevent a complete collapse. Over the weekend, Trump tweeted, “THE BIGGEST SHARE MARKET IN HISTORY YESTERDAY!” without saying anything to respond to, or even acknowledge, the nation’s growing economic fears. The following week, the circuit breakers tripped again on two different days as stocks continued to decline.
The CARES Act, along with the aggressive move by the Federal Reserve to lower interest rates and add liquidity to the financial system, ultimately stopped the market from falling. In the months that followed, Wall Street recovered, while Main Street suffered.
Experts say this is just one example of why it was not only unnecessary, but reckless, for Trump to claim credit for a rising market. “In the investment industry, in general, we know that the factors that move the stock market are innumerable and complex. It’s difficult at best to assess cause and effect, ”Martin said.
Despite his self-proclaimed business acumen, Trump wasted some of the market momentum given to him, analysts said. “He’s done quite a few things to really hamper the progress of the stock market,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “The trade war with China has been by far the most damaging.”
This trade war was widely viewed as a failure: it ended in a difficult truce in early 2020, with little gain for American consumers or businesses.
The new president, on the other hand, faces a heavier lift. “President Trump hands Biden a crumbling economy still down nearly 10 million jobs from its pre-pandemic peak and struggles to avoid a double-dip recession,” the economist wrote in Moody’s Analytics chief Mark Zandi in a research note earlier this week.
“While you could say that what Trump inherited was a ‘normal market’, Joe Biden is inheriting a market that is at extremes,” Martin said. “You just have a whole new ball game for Joe Biden.”
Valuations are high, inflation is low overall but shows pockets of escalation, and market watchers say Wall Street appears to be positioned for a better scenario regarding the containment and immunity of Covid-19. Anything that does not meet high market expectations could trigger a reversal in investor sentiment.
“If you’re the average person, do you care if the GDP was 3.2% or 3.4%? No, you care if you have a job.
If the market falls from its current highs, economists don’t expect Biden to react like his predecessor might have. Unlike Trump, Biden is more likely to focus on containing Covid-19 and resuming the labor market recovery. “The Biden administration, I think, is going to focus more on the unemployment rate and jobs and less on what the current 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 will take a long time to get those 10 million jobs back, especially because there have been so many permanent business closures. This is what I think the administration will be focusing on and, frankly, should be focusing. “
“If you’re the average person, do you care if the GDP was 3.2 or 3.4 percent?” He said. “No, you care if you have a job.”
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