The Impact of Political Change on the Stock Market: Biden vs Trump
When discussing the relationship between political changes and the stock market, it is essential to understand that the stock market is not a perfect indicator of overall economic health. Rather, it is a reflection of investor sentiment and corporate performance in the public markets. This article delves into how the potential transition from Donald Trump to Joe Biden might influence the American stock market, based on recent economic policies and investor perceptions.
Stock Market as a Reflection of Business vs. Economy
Many view the stock market as an indicator of business health rather than a robust gauge of the overall economy. Regular Americans are often only marginally affected by the stock market, except through trickle-down effects. Most individuals do not have surplus funds to invest, hence the market's effects are more felt by the upper echelons of society who can.
“The stock market is an indicator of big business, not the economy. Regular people are not affected by the stock market except in a trickle-down way.”
While it is true that businesses contribute to economic growth, the stock market's growth does not always correlate with the economy's health. Moreover, the Dow Jones Industrial Average (DJIA) only includes publicly traded companies, leaving out many small private businesses that are essential for economic growth.
Comparing Economic Policies of Previous Presidents
During President Trump's administration, the DJIA saw a remarkable 50% increase in its value within three years. In contrast, under President Obama's administration, the DJIA saw a more substantial increase of nearly 140% over eight years. It is important to note that although these figures demonstrate market performance, they do not necessarily reflect the economic well-being of the nation's majority.
“Yes, we need businesses to grow our economy, but we don’t need stock market growth to grow our economy. Plus, the DJIA only includes publicly traded companies, not privately owned businesses.”
Implications of the Biden-Harris Administration
Joe Biden's platform aims to address social and economic inequalities, which could lead to a focus on corporate tax reforms. If the Senate maintains its current composition, Biden's proposals regarding corporate tax hikes may face significant resistance. However, a Democratic majority in the Senate could pave the way for such reforms, raising concerns among businesses, especially those benefiting from Trump's economic policies.
“President Biden's victory is a source of concern for companies, as he plans to increase the corporate tax from 21% to 28%, which remains below the pre-Trump threshold of 35%.”
It is worth noting that the stock market is currently showing relative stability, as it tends to favor conditions of certainty. Given the ongoing challenges posed by the COVID-19 pandemic, the market is likely to remain volatile. However, once the election results are fully settled, the market might experience some minor adjustments.
“The stock market will remain volatile due to the pandemic and won't react as much to Trump. However, it will likely go up a bit once the election is concluded.”
Timing and Uncertainty
The upcoming January 5, 2021, Georgia runoff elections will determine whether the Senate remains Republican or becomes Democratic, thereby influencing the likelihood of implementing tax reforms. The market is currently waiting for these elections to gauge the direction of future policies.
“The stock market is waiting for January 5, 2021, and the second round in Georgia where two Senate seats are at stake. Thesetwo seats will determine the balance of power in the Senate.”
Conclusion
While the stock market and economic indicators may offer insights into business performance, they do not fully capture the well-being of the broader economy and its impact on regular citizens. As the political landscape continues to evolve, it will be crucial to monitor and understand the implications for both the market and the nation as a whole. The upcoming political transitions will likely bring changes, some of which may affect the stock market in unforeseen ways.