President’s don’t have a huge effect on the stock market usually. They do take a lot of credit for it. It’s as if they are puppet masters or something. They do suggest policies that can be market-friendly or not market-friendly. They do control the Executive branch and can put into action more regulation, or less regulation. They also appoint people to run the executive branch that can be market-friendly or not.
Americans do look to the President for confidence. A confident leader, even if the over all policies are not market-friendly, will settle the market and people will buy and hold.
It’s worth noting in 1977, the index was down 11.5%, up 1.06% in 1978, up 12.31% in 1979, and up 25.77% in 1980. Those were the Jimmy Carter years and in November of 1980, Ronald Reagan was elected. The market was relieved about that.
But, the President doesn’t control the market. No one person can.
Obama took a lot of credit for the market. His minions in the press constantly pointed out how well the stock market did despite the anemic economic growth during his term. Obama was lucky that he came into office in the middle of one of the largest downturns in American history. Made his stats look better.
But, his policies actually hurt the market.
Trump loved to take credit for a soaring stock market. Barely a press conference went by that he didn’t point out how well people’s retirement was doing and how high the market was.
Trump had it tougher to make gains because he came in after Obama since he was inheriting a rally. Trump had market-friendly policies and the market did respond. Covid was an exogenous shock that killed the rally.
Trump couldn’t control Covid, couldn’t anticipate Covid, and his response to Covid was disorganized. He knew it was an Achilles heel and he tried to downplay it early. At the same time, Democrats politicized Covid from the very beginning and that’s one reason why we are where we are today.
I want to add this even though it’s not germane to my topic today. Just so you know, there are many many many peer-reviewed published medical studies that show masks do not work on stopping Covid viruses. It even says so on some mask boxes that the mask will not stop a virus. If you are under 20 and healthy, you have a 0% chance of dying from Covid. If you are under 60 and healthy, you have a 99.98% chance of recovering. The vaccine will not stop you from getting Covid, nor does it stop you from spreading Covid.
It’s the old, the infirm, and the obese that die from Covid. In the US, we happen to have a lot of fat people.
It highlights the point of how politicized Covid policy around the world is.
That brings me to President Biden.
Biden doesn’t inspire confidence in the market. He has been a disaster on executing since being inaugurated to office. Not only that, his appointees have been misguided, and not market friendly.
Recall, his comptroller nominee was from pre-1989 Communist Russia and wanted to federalize all the money, including yours, in the banking system. Currently, Biden has decided to appoint a Federal Reserve Vice Chair whose first inclination is to use the Fed to combat climate change, not it’s dual mandate of inflation and unemployment. His other two nominees primary concern is racism, and have published more about racism than actual free market capitalism and banking. None of them are good picks in the current economic climate we have.
Currently, the Fed has its hands full of problems with their policies and we have high inflation along with the great resignation. During the years post 2008 crash, the Federal Reserve expanded its balance sheet in unprecedented ways. It even bought corporate bonds for the first time in history. This has to be unwound in a way that won’t upset the market.
No one Biden has picked has the expertise or skills to take on the tasks that are burning the undersides of the feet at the Fed.
Not only that, but Biden’s agenda is totally misguided in the Senate. It’s so bad, he can’t get 50 Democratic Senators to agree. Instead of figuring something out, he is trying to blow up the Senate by killing the filibuster. The House of Representatives is led by the nose and social media by hard leftists like AOC, not centrists. The country wants centrists.
The market realizes that.
It’s tanking again today and bond yields are the highest they have been in years. It is not in free fall yet, but it is getting to the precipice. You can feel it in discourse, and in behavior.
Here is a link to a chart of $SPY performance since the start of this year. Here is a photo below if you don’t want to click the link.
Analysts are forecasting a 9.6% rise in the S+P. The historical long run return of the S+P is roughly 8%. This year so far it was down 2.2% by Jan 14, and today is down another 1.41% as I write this.
The pattern this year has been that Federal Reserve has soothed the market with kind words. There are no earnings to hang your hat on and the performance of the White House has not inspired confidence. The market is also pricing in three rate hikes, possibly four. That will increase the cost of capital, and change investment decisions a little bit.
Back in mid-December, I wrote that this year would be the year winter comes in crypto and though it is early, I have been right. I think this going to be a hard year for crypto no matter what.
Can it change?
Not likely given the focus of this administration. Buckle your seatbelt. It’s going to be a rough year.