Markets Are Lower Under Biden
by David Revill
It’s been a long 16 months since Joe Biden was sworn in as the 46thPresident of the United States.
During that time, we’ve seen a President head in all different directions. From a kind of Santa Claus handing out stimulus checks to everyone. To a kind of Scrooge, halting the Keystone XL Pipeline, stopping all Russian shipments of oil.
As one talking head remarked: “We thought we were electing a moderate.” Instead, we got just about everything else. But moderate wasn’t one of them.
If there is one thing that’s becoming clear, it is that no matter who the real Joe Biden is, the financial markets don’t really like what they see. Yesterday, for the second time in his Presidency the stock market closed lower than when he was sworn in. And this time it looks like this will be a permanent condition.
There is a growing negative sentiment among Wall Street Traders and Investors alike.
The day Biden was sworn-in stocks rallied. The market-leading tech group, Amazon, Alphabet, Facebook, Apple, and Microsoft all rallied to new highs.
Biden was like a kid taking the family car out for a spin. For over 50 years Biden had dreamed about this day, and at last, it was his.
And like that kid with the car, there was a bit of over-steering. A sharp turn to the left, followed by a veer to the right.
Stand back, Joe Biden is in charge!
The new President immediately sat down at the Resolute Desk and began to issue executive orders. One after another, after another. As fast as they handed him the leather-bound document, it was signed and became law. Regulations poured out of the Oval Office like a flood.
Out with those old Trump policies, in with the new Biden policies. Stop the oil pipeline, and give everyone a vaccination. Oh, and let’s send them a check while we’re at it.
It was a whirlwind the likes of which this country had never seen.
It was all a bit too much. Americans began to wonder just what had we elected? There were even some, who wonder not just how, but indeed whether, we elected this new President Biden. But that’s a conversation for another time.
In the meantime, just after the inauguration, Wall Street began to swoon. Falling 9,000 points on the Dow in just a couple of months. It was beginning to look just too radical. It was beginning to dawn on the investor class, that all this regulation was not going to help corporate earnings. And rumors of an all-new energy policy were also disquieting.
Biden backed off, for now. And the march to new mandates was briefly put on hold. And then used the President’s ultimate weapon: cash. Send everyone a check, that’ll make them happy.
The federal government coffers were open, and out the checks went. To poor and rich alike. Corporate and not-for-profit. By the time they were done about $9 Trillion dollars made it to the people’s wallets. Or electronic bank deposits. Whichever was faster.
Everyone was happy now. Like the old Roman Circus, we’d gotten the “bread.”
Markets rose, and once again Wall Street was the place to be.
Unfortunately, the euphoria did not last long. Those pesky analysts complained that all this extra cash might mean inflation was dead ahead. And then there were the repeated rumors of a transition for our entire energy complex. Gasoline prices started to rise. Later everything would rise in price.
A thing called Supply Chain, a term we might not have been too familiar with before, but we all became intimately acquainted with now. The supply chain, meant those specialty items we wanted to purchase, first became more costly, then just not available at all.
All the while markets began to get shaky. As more and more lost confidence in the President. Wall Street trudged on, but with a heightened sense of insecurity.
Along the way came that dreadful evacuation of Afghanistan. People’s lives were put in danger, and millions in arms and equipment fell into the hands of hostile forces. And eventually, much of the country simply turned over to the Taliban.
What a disaster.
Add it all together and the score card begins to look like this:
Inflation at a 40-year high
Consumer Confidence at an all-time low
International Goods Trade a Trillion-Dollar Deficit, an all-time record.
New Home Sales sliding to a two-year low.
Put it all together, and Wall Street sees what you and I see. This economy is in trouble.
And the reaction predictably: the markets are all falling. Down to levels that indicate that a Bear Market has already been achieved.
And down to levels we first saw when Joseph Biden was sworn in as the 46th President of the United States on January 20th, 2021.
That’s right it’s been a very long and bumpy road. But after all, is said and done, we’re right back where we started from:
Biden Inauguration January 20th, 2021: Dow 31,188.38
Yesterday June 13th, 2022: Dow 30,516.70
Well, it’s fair to say that markets don’t like surprises. But that’s just what they got yesterday. For weeks now, most on Wall Street have been expecting the Federal Reserve to raise interest rates when they meet tomorrow.
The thinking was that a half-point raise would be about right. But then an article in the Wall Street Journal indicated that a 3/4% rise was much more likely, and in fact, the Fed might jump rates by a full percentage point. Effectively doubling interest charges to corporations and individuals alike.
Suddenly the ramifications of all this hit like a ton of bricks.
Down when just about everything, the Dow fell nearly 3% on the day, S&P 500 nearly 4%, and the NASDAQ over 4 1/2%. No assets were immune, as bonds, precious metals, and Cryptos all traded lower.
In overnight economic news, China continues to attract offshore investment. For the first 5 months of this year, China has had a direct foreign investment of nearly $90 Billion in US Dollars.
While halfway around the world, Germany confirmed that Inflation for May came in at a record 7.9%. And the number one driver of German Inflation, just like here in the US, was the cost of energy. Up an incredible 38% higher, and driving all other related costs higher as a result.
I can’t help saying again, that the only people hurt by the Russian oil boycott, are the Western countries: Germany, Europe, and the USA.
Talk about a major policy mistake, this is it.
Here in the US, the National Federation of Independent Businesses has just released its latest survey numbers. And they’re not looking too good.
The NFIB Index edged down to just 93 and a fraction, the lowest level since the Covid Pandemic.
But most concerning, the number of small businesses looking for better times ahead, has sunk to an all-time low. From their perspective, the future is not looking bright.
In just a few minutes we will get the latest report on the Producer Price Index. This report, along with retail sales tomorrow morning, will be the last 2 major reports before the Fed’s Interest Rate decision is announced tomorrow afternoon.
Most analysts are not looking for much of a change in Producer Prices, as this remains the hottest general area of inflation.
In earnings today, HVAC company Ferguson PLC is expected to report shortly. While infrastructure company Core and Main is currently trading higher on positive results.
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