More than other presidents, and to the endless frustration of economists, Donald Trump related the performance of the stock market to the country’s economic health. However, President Joe Biden is unlikely to assess his own achievements by the stock market swings, economics experts say – and that message is likely to resonate with an anxious population.
“I doubt that Joe Biden sees the stock market as a barometer of his immediate success,” said Thomas Martin, senior portfolio manager at Globalt Investments. “He focuses on the health and well-being of Americans. He will assess success based on how far he can level the curve, prevent death and get the economy back in shape. “
For much of Trump’s presidency, it was easy for him to claim credit for stock gains, since he was prepared for success, economists say.
“The economy was very good. Nothing was really out of balance, ”said Dan North, chief economist for North America at Euler Hermes.
Corporate expectations of lower taxes and fewer regulations have increased business optimism. “It was the right environment to go up. The Biden stock market has a lot going for it, ”said North.
The Biden stock market has a lot going for it. “
On March 9 and again on March 12, when the coronavirus began to dominate the country, stocks fell so fast that electronic “breakers” had to be triggered to avoid a complete collapse. That weekend, Trump tweeted: “THE LARGEST STOCK MARKET INCREASE IN YESTERDAY’S HISTORY!” without saying anything to address, or even acknowledge, the country’s growing economic fears. The following week, the circuit breakers were tripped again on two different days, as inventories continued to fall.
The CARES Act, along with aggressive action by the Federal Reserve to reduce interest rates and add liquidity to the financial system, ended up stopping the market from falling. In the following months, Wall Street recovered, while Main Street suffered.
Experts say this is just one example of why it was not only useless, but reckless, for Trump to claim credit for a bull market. “In the investment business, in general, we know that the things that make the stock market move are numerous and complex. It is difficult, at best, to assess cause and effect, ”said Martin.
Despite his self-proclaimed business acumen, Trump wasted some of the market momentum he received, analysts say. “He did a few things to really hinder the stock market’s progress,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “The trade war with China was by far the most damaging.”
This trade war was widely regarded as a failure: it generated an uncomfortable truce in early 2020, with little gain for American consumers or businesses.
The new president, on the other hand, faces a heavier uprising. “President Trump is handing Biden a shabby economy, still with almost 10 million jobs below the pre-pandemic peak and struggling to avoid a double-dip recession,” wrote Moody’s Analytics chief economist Mark Zandi in a note of research earlier this week.
“While you can say that what Trump inherited was a ‘normal market’, Joe Biden is inheriting a market that is at extremes,” said Martin. “You just had a whole new ball game for Joe Biden.”
Valuations are high, inflation is largely low, but shows pockets of escalation, and market watchers say that Wall Street appears to be positioned for the best scenario in relation to Covid-19’s containment and immunity. Anything that does not meet the high expectations of the market can cause a reversal in investor sentiment.
“If you are an average person, do you care if the GDP was 3.2 or 3.4 percent? No, you care if you have a job. “
However, if the market drops from current highs, economists do not expect Biden to respond in the way that his predecessor would. Unlike Trump, Biden is more likely to concentrate on containing Covid-19 and causing the slow recovery in the labor market to continue. “The Biden administration, I think, will 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. “At the moment, 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, mainly because there have been so many permanent company closings. This is what I believe the government will be focusing on and, honestly, it should be. “
“If you are 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”.