The Dow hit a record 40k under Biden. Will it impact the election?

How is the U.S. economy performing under President Joe Biden?

It all depends on how you look at it.

Yes, inflation is up 20% since Biden assumed office in Jan. 2021 and many Americans are struggling to pay rent and buy groceries.

But inflation has dropped from a whopping 9.1% in 2022, to 3.4% today. And the unemployment rate is just below 4%, which is a near-record low.

Equity investors are doing extremely well due to a roaring stock market.

On May 16, the Dow Jones Industrial Average hit a record high of 40,000. It has since retreated into the 39,000 range.

The S&P 500 and NASDAQ Composite indexes also are at record highs.

The White House celebrated the milestones just as Biden’s Republican opponent, former President Donald Trump, did in 2020 when he was in office and the Dow hit 30,000-a record high at that time.

Which candidate is better for the stock market?

It’s hard to say.

The Dow has jumped 45% percent since Biden won the 2020 election in early November of that year-compared with a 34% increase at the comparable time in Trump’s presidency.

Trump faced a violent stock market plunge in early 2020 due to the onset of the COVID-19 pandemic. But markets quickly recovered and the Dow had jumped 70% by the time Trump left office.

Polls show that voters have greater trust in Trump than Biden when it comes to the economy, and the president is polling behind Trump in most of the crucial battleground states.

Biden also has been criticized for his advanced age, 81, his response to the Israel-Hamas war, illegal immigration, and the way in which his administration handled the U.S. military exit from Afghanistan.

Trump is slightly younger than Biden at age 77. However, Trump is often perceived as being more energetic than Biden. And despite scandals and court cases, polls show many Americans see Trump as being a strong leader who kept the country safe during his time in office.

So, can Biden count on the stock market being his saving grace or will high inflation coupled with other key issues be enough to put Trump back in the Oval Office? 

“Stock market fluctuations usually do not have any strong relation to the party in power or the president. However, the candidates do tend to promote economic and financial positives as their achievements,” Arabinda Basistha, a professor of economics at West Virginia University, told the Baltimore Post-Examiner. “It is uncertain how much the uncommitted voters will believe those messages.”

Basistha noted that unemployment remained low under both Trump and Biden. However, Basistha said that job gains under Biden may not matter much since inflation is not coming down fast enough for many Americans to take notice.

“Even though the inflation moderated in the last year, the rise in the level of prices have mostly stayed. There were some wage growth in both regimes. But, the post pandemic wage growth was not spread evenly to fully compensate for the price rises for a lot of households. This gets reflected in the struggle to balance the household budget, including groceries and rent and other necessities.”

As for whether Biden will benefit politically from a strong stock market, such a prospect is somewhat unlikely, Basistha said.

“The relation between political success and financial markets is low and unstable. It is true that in case of widespread financial market troubles, the incumbent is less likely to be reelected. However, that relation is not as strong in situations when the markets are rising unless it is accompanied by widely shared economic gains for the households. Moreover, the recent strong performance in the markets is mostly due to two factors: tech stocks and the forecast that the Federal Reserve is not going to raise the interest rates further. I am unsure how much the voters will feel this financial market gain in their daily life or credit the party in power the gain.”

Richard Vatz, a professor emeritus of political persuasion at Towson University, largely agreed.

“Biden likely will get negligible credit for a rising stock market because presidents have a minimal effect on the stock market.  Furthermore, economists remind us frequently that prices may rise due to a bubble that is not reflective of fair value and that inflation can make rising prices a contraindication of a good economy. Finally, stock rises differentially affect the public, perhaps rewarding those who have invested wisely and punishing those who have not invested and those who have not invested smartly.”

Former Rep. Alan Grayson, a Florida Democrat, who served on the House Financial Services Subcommittee on Capital Markets, said Biden should get credit for the stock market being at all-time highs.

“This is simply a reflection of Democrats governing in favor of what’s best for everyone, while Republicans simply stoke greed and do their best to cut healthcare, education and Social Security.  Since Biden represents the greater good, not selfishness, and since the economy remains the most important issue for voters, he ought to get credit for this.”

Grayson said a recent poll showed close to 3 in 5 Americans believe that the economy is in a recession even though it is not is indicative of pervasive economic inequality throughout the nation.

“The rich get richer, the poor get poorer, and it’s the rich who love the economy just the way it is. The United States has less economic equality than any other developed country in the world.  There is overwhelming support for fundamental change in America, toward more economic equality and less debt-slavery. The system is rigged against ordinary people, they know it, and they’re very unhappy about it.”

Rick Tyler, an MSNBC political analyst and partner and co-founder of the consulting firm Foundry Strategies, said Biden deserves some credit for the record-breaking stock market.

“Biden will and should take credit for the 40k benchmark however, he will get credit from the wrong voters. He needs voters in the middle to lower-middle working class without big retirement accounts who are getting hammered by gas and food prices, not rich voters with big investment portfolios.”

As for public perception about the strength of the economy, it all depends on whom you ask, Tyler said.

“The truth is that capitalism sucks if you don’t have capital.”

About 60% of Americans are invested in the stock market, according to a Gallup survey released in May 2023.

The survey found that income and education were strong predicators of stock ownership, with more than 80% of adults in households that make $100k a year or more and with a nearly equal percentage of those who have college and post-graduate degrees owning stock compared with about 30% in households that made less than $40k a year.

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