Joe Biden, Stock Market Hero
The CNN headline news article says it all:
Biden at 100 days: Hottest stock market since JFK
Sounds like quite the accomplishment! As reported, the S&P 500 is up a whopping 8.6% since Biden took office, the largest gain since 1961. This was much larger than Biden’s predecessor, who only managed to see a 5% gain in his first 100 days in office.
CNN went as far as quoting Randy Frederick, vice president of trading and derivatives at Charles Schwab, who said:
There is a belief out there, that is absolutely incorrect, that markets do better under Republicans. It's completely wrong.
The article goes on say that Wall Street approves of Biden’s attempt to “corral the Covid-19 crisis and stimulate the economy,” and that:
the historic gains at the start of the Biden era add to a sense of optimism about America's economic recovery…
A chart is provided showing how great the returns under Democrats have been versus Republicans, who more often than not find themselves in a stock market slump when taking office.
This is a great example where stats or data are used to convey something which sounds interesting as a headline, but once you start to look deeper for substance, you find very little.
The only thing more misleading than celebrating gains in a stock market index, is when this gain is attributed to a President, Democrat or Republican. One of the best cases of this is Venezuela, where in 2019 the Forbes headline read:
The Caracas Stock Market Index is up nearly 200,000%.
Of course, the article notes, against the US Dollar, the enormous gain amounts to a loss of 94% in the year; the lesson being, we can’t always use percentage gains in stock markets as a barometer of success.
True, under Biden’s first 100 days, the market has performed well. We should ask questions, such as: What does the gain in the stock market mean, and what was the cost society paid for this?
As for the gain, it helps illustrate the often-cited separation between Wall Street and Main Street. The same CNN article notes that in 1932, under FDR and during the Great Depression, the stock market saw a gain of 104.4%. This big win should mean FDR was a successful President, or the nation was better off for the various government interventions and socialist schemes enacted during his presidency. Perhaps the divide between the stock market and the real economy has existed for longer than we realize…
And the cost? CNBC weighs in:
Congress already had appropriated more than $3 trillion in stimulus and the Federal Reserve had relaxed policy to the loosest point in the central bank’s history. All told, more than $5.3 trillion has been spent on Covid-related relief efforts, and the Fed’s bond purchases have nearly doubled its balance sheet to just shy of $8 trillion.
It seems, many trillions of dollars in stimulus efforts plus easy money policies can do wonders for the stock market, assuming the stock market is influenced by central bank action such as trillion-dollar bond buying and artificially low rates.
While big gains are great for executive compensation, corporate buybacks, money managers and those heavily invested in the stock market, we don’t hear about the millions who lost their job due to forced closures, or those on a fixed income who struggle with the perpetual loss of purchasing power of their dollars. We live in a society that borrows heavily against its future so that a select few can live in the now, calling stimulus today what will be debt tomorrow; a debt which can never be repaid. But this seldom makes headlines. It’s much more of a difficult story to cover and not as upbeat as an 8.6% stock market win for the new President.