Americans can no longer ignore it. Our president's memory is failing before our eyes.
But how does President Joe Biden's failing memory affect our economy and stock market?
In the political sphere, a shockwave is rippling as Special Counsel Robert Hur of the DOJ unveils a report stating President Biden as mentally unfit to face charges for allegedly retaining classified documents. The report paints a picture of an elderly man battling with diminished faculties and a faulty memory, stirring up a whirlwind of reactions.
But it gets worse. It was said Biden couldn’t remember when he was vice president or when his son Beau Biden died. Biden, standing firm against the allegations, vehemently denies these claims.
But this report has sparked speculation about the possibility of former First Lady Michelle Obama stepping up to the presidential plate.
How the Presidency Affects the Economy and Stock Market
The impact of US Presidents on the stock market and the economy is complex and influenced by various factors.
The good news is that the relationship between presidential actions and the stock market is not always immediate or direct.
Markets are influenced by a multitude of factors, including global economic conditions, corporate earnings, interest rates, policies implemented by the administration and geopolitical events. Additionally, presidential terms are relatively short compared to economic cycles, making it challenging to attribute market movements solely to a specific administration.
6 Ways U.S. Presidents Can Affect the Economy and Stock Market
1. Policy Initiatives. The policies implemented by a president, such as tax reforms, regulatory changes, and fiscal stimulus measures, can have a significant impact on the economy and, consequently, the stock market. For example, tax cuts may boost corporate profits, leading to increased stock prices.
2. Economic Agenda. The president's economic agenda and priorities can shape economic policies. Initiatives related to infrastructure spending, healthcare reform, trade policies, and other key areas can influence business and investor confidence, impacting the stock market.
3. Monetary Policy Influence. While the President does not directly control monetary policy (which is under the purview of the Federal Reserve), their stance on Federal Reserve appointments and general economic philosophy can indirectly influence interest rates and monetary policy decisions, impacting financial markets.
For example, the Federal Reserve has been raising the federal funds rate to combat inflation. When the Federal Reserve raises rates, the interest rate on your savings account goes up, hence the high-interest savings accounts and certificate of deposits that pay 5% APY and more.
4. Global Relations and Trade Policies. Presidents play a crucial role in shaping international relations and trade policies. Trade agreements, tariffs, and diplomatic relations can affect global economic conditions, impacting multinational companies and the stock market.
For example, the President's stance on ESG (Environmental, Social, and Governance) policies can have a huge impact on the stock market with both potential benefits and challenges. ESG is gaining significant traction with investors, particularly millennials and Gen Z, who are increasingly prioritizing sustainability and social responsibility. Companies demonstrating strong ESG practices may attract more investment, leading to capital inflows and economic growth. But on the negative side, stringent ESG regulations and disclosure requirements can increase compliance costs for companies, especially smaller ones.
Source: S&P Global. “What is the ‘G' in ESG?” and APLANET. “Understanding ESG Risks and their Impact on Businesses.”
Many investing apps, mutual funds and brokerage firms now offer investment products that employ ESG principles.
5. Market Sentiment and Confidence. The president's communication and leadership style can influence investor sentiment and confidence. Clear and consistent economic messaging may contribute to a stable market environment, while uncertainty or unexpected policy shifts could lead to volatility.
6. Crisis Management. How a president handles economic crises or unexpected events can impact market stability. Decisive and effective crisis management can help restore confidence, while perceived mismanagement may lead to market disruptions.
Investors should consider a broad range of factors when making investment decisions and not rely solely on the political landscape.
Diversification and a long-term investment strategy are generally considered prudent approaches to navigate the uncertainties associated with political and economic changes.