Liz Peek: Biden thinks stock market doesn’t matter: Here’s what he doesn’t get
https://www.foxnews.com/opinion/biden-thinks-stock-market-doesnt-matter-heres-what-he-doesnt-get
Stock markets are crashing, but Joe Biden doesn’t care.
The cheery president is oblivious, even though U.S. investors have lost $7.6 trillion since he took office and we are now officially in a bear market.
Politico reports that Biden wants to hit the road, eager to tout his economic achievements and confident that the “nation’s outlook is brightening.”
This, as economists from Bank of America, among many others, are predicting a recession in 2023 and rising unemployment thanks to the Federal Reserve’s efforts to combat inflation. And, as prominent companies like FedEx and GE confirm such gloomy forecasts by warning more trouble lies ahead.
But then this is the same clueless president who hosted an “Inflation Reduction Party” featuring James Taylor crooning about drug addiction (???) the same day a bad inflation read caused the Dow to plunge 1,200 points – one of the worst drops this year.
Asked recently about the slide in share prices, Biden said, “The stock market doesn’t necessarily reflect the state of the economy, as you well know. And the economy is still strong.” Actually, the economy shrank during the past two quarters, the housing market is in freefall and an inverted yield curve is flashing red.
Here’s news for President Biden: the stock market matters. The direction of share prices influences consumer sentiment, which in turn helps drive spending, job growth and also… elections. It is not a coincidence that Biden’s approval ratings inched higher this past summer as stock markets recovered some of the ground lost last spring.
Biden has more than once criticized his predecessor for boasting about rising share prices. During the 2020 campaign he said, “Throughout this [pandemic] crisis, Donald Trump has been almost singularly focused on the stock market, the Dow and Nasdaq. Not you. Not your families.”
Biden promised that if he were elected he would “be laser-focused on working families… Not the wealthy investor class. They don’t need me.”
Turns out, the “wealthy investor class” has much in common with those middle-class families that Biden pledged to help; both are being clobbered by sky-high inflation and anti-business policies. Democrats’ reckless spending has fueled a 12.7% increase in prices under Biden’s watch; combined with higher interest rates, the average American has lost $4,200 in real annual income, more than wiping out the gains made during the Trump years.
The nation’s wealth dropped by a record $6.1 trillion in the second quarter, thanks to falling stock prices. That was the second consecutive decline in a row and occurred despite still-rising home prices. Now that house prices are dropping, the current stock market slump is even more painful.
Declining consumer net worth is damaging; if people feel richer, they spend more. It’s that simple.
Much of the discretionary spending in the economy, outlays for travel or entertainment, for instance, is done by people in the higher income brackets. Households earning more than $100,000 accounted for only about 27% of the U.S. population in 2020, but made 47% of expenditures.
Wealthier people not only spend more than the average person, they also rein in their purchases when they see their net worth plummeting. These are the folks that will determine whether the economy is stuck or soaring. These are the people most impacted by a sinking stock market.
The tie between consumer net worth and spending is one reason the economy recovered faster than expected from the pandemic shutdown. A near-20% rise in stock prices during 2020, combined with over $2 trillion in excess savings, meant that even as COVID-19 still stalked the nation, Americans were ready and able to spend.
That combination of “wealth effect” and cash in savings accounts should have alerted the Federal Reserve that spending would exceed their forecasts and, given supply chain problems, send prices for scarce goods soaring.
The same combination should have prompted the government, which had already doled out trillions of dollars in aid to combat the pandemic slowdown, to turn off the spigots. Instead, Democrats pushed through the $1.9 trillion American Rescue Plan, throwing gasoline on the inflation fire.
Despite Biden’s divisive rhetoric, it isn’t just the nation’s wealthiest who are impacted by the ups and downs of stock prices. Gallup reports that 58% of Americans own shares, either personally or with their spouse.
Retirees invested in stocks are struggling to maintain their standard of living as inflation drives the cost of everything higher and their nest eggs shrink.
Savers who have put their money into IRAs or other plans and invested in stocks see their portfolios dwindle. Pension plans are also losing ground; companies providing retirement benefits will have to increase their contributions, with less money left over for pay hikes or new hires.
Even public pension funds are being hit by the stock market sell-off. Those groups are heavily invested in private equity funds, which are struggling to realize gains as valuations fall. The Wall Street Journal reports: “Public pensions reported returning a median minus 7.9% for the fiscal year ended June 30, their worst losses since 2009, according to data from Wilshire Trust Universe Comparison Service…”
Because those plans are underperforming their stated targets, cities and states will have to raise taxes or cut services to meet their promised retirement funds for cops and teachers.
So when Candidate Biden promised in 2020 to “end to the era of shareholder capitalism,” he effectively promised to undermine the very foundations of our economy.
Donald Trump predicted that if Joe Biden were elected, “the stock market will crash.” Was he wrong, or just early?
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