The US stock market is experiencing a positive momentum, with Wall Street predicted to have a successful year. This development carries potential political implications, as it has in the past when market performance influenced presidential elections.
According to market analyst Ken, the current market trends indicate that the US is unlikely to enter a recession. This optimistic perspective should not be interpreted as a solution to all economic challenges, but it does suggest that Wall Street will enjoy a prosperous year. This positive market performance has historically worked in favor of candidates, such as Ronald Reagan, due to the perception of economic stability.
From a political standpoint, this could be advantageous for President Joe Biden. One of his major advantages lies in the Federal Reserve's ability to ensure a soft landing for the economy. With economic growth exceeding expectations and bolstered by government spending, there may not be a need for interest rate cuts in the near term. The avoidance of rate cuts is preferable, as it mitigates the risk of a resurgence of inflation that plagued the US economy in the 1970s. Federal Reserve Chair Jerome Powell is aiming to prevent a similar outcome.
While the stock market is currently experiencing a bull market, it's important to acknowledge that inflation has eroded some of these gains. Prior to the COVID-19 pandemic, former President Donald Trump witnessed an impressive annualized return of 36% in the S&P, whereas President Biden's administration has achieved a modest 7% return. The majority of this growth is attributed to what is referred to as the 'magnificent seven,' indicating that the broader stock market is not performing as well.
Nevertheless, the current state of the US economy is characterized by steady growth and a recession has been averted, at least for now. Interest rates do not need immediate adjustment, and it is essential for inflation to continue its downward trend. These factors are considered beneficial for both the country and President Biden's prospects for re-election.
The Gross Domestic Product (GDP) report supports this positive outlook, with investors sensing the typical election year pattern of increasing stock prices and a thriving economy. Efforts are being made to sustain this momentum, as it is widely recognized that strong market performance has historically influenced electoral outcomes.
