Well, I gave Biden some credit back in December for the nice bump that we had seen in the stock market in 2021. I felt obligated to, given how well the market had performed … +27% last year.
Still, I noted then that I was worried that Biden wanted to be too helpful and that significant inflation was a real worry. He literally said “help is on the way” and released trillions in spending on top of what Trump had already spent.
Now I have to say that the ‘Biden Bump’ has gone ‘Bust’. Here’s a list of all the headline troubles we’re seeing …
⁃ Q1 GDP down: -1.5%
⁃ Consumer Inflation: +8.6%
⁃ Fuel Prices: 2.1x
⁃ Producer Prices: +11.2%
⁃ S&P 500: -18% YTD
⁃ 10 Year Treasury: +160bps
⁃ 1 million less employed vs 2019
⁃ Mortgage Rate: 6.5%, 2x year ago
⁃ National Debt: $30T, +$4T vs 2020, 129% of GDP
My list of positive signs has many fewer bullets:
⁃ Unemployment Rate: 3.6%
⁃ Real Home Values: +25% vs 2020
⁃ Consumer Confidence Index: 106
In my mind, our overall economic issues are caused by the explosive government spending throughout the pandemic. The debt-backed stimulus didn’t create any new value, it just resulted in more dollars chasing the same products & services. Governments locked people out of work and then threw money at the problem they created.
I don’t doubt that some stimulus, particularly early in the pandemic, would have been useful in the right places. Still, what was handed out dramatically overshot the need or ended up in the wrong hands.
Importantly, the hand outs started under Trump and continued with Biden. Like most spectacular government failures, the relief bills were passed by both parties. We can only be happy that the GOP & a few Democrat Senators prevented further spending as the dubiously named ‘Build Back Better’ proposal was blocked.
Since the money is already gone and it’s an election year, no government “course correction” will be coming our way soon. I’m afraid that almost all of last year’s ‘Biden Bump’ stock market good fortune in our portfolio has already disappeared in 2022.
As we face the second half of the year, my only hope is that some of these economic trends – especially inflation – reach their peak and start heading back down. It may take a few years for them to get back to pre-CV19 levels.
Hopefully after the midterm elections, political gridlock will have been restored to Washington and they can stop being as “helpful” as they have been the last 18 months.
How long do you think it will take to “right the ship” economically?
Image Credit: ProfessorBuzzKill.com