Part of the ‘I told you so’ glory of supporting a Republican presidential candidate is watching the markets go up almost inevitably the next day. Efficient markets share real-time data, and indeed, the stock market from this perspective is an excellent, though imperfect, indicator of what the global business community thinks of a US presidential election.
I would say looking at the direction of the stock market after election day, to get a glimpse of a president’s performance for the economy, is about as accurate as the famous “Big Mac Index” for currency valuation, which compares the relative price of a Big Mac in 55 countries. (If you’ve never really thought about whether currencies are trading at appropriate levels according to purchasing power parity theory, you’re not alone – but believe that if you focus instead on the Burgernomics you will find this area of investigation quite fascinating). It’s light and fun, and it can get a glimpse. But it’s not exactly a tool from which to make investment or policy decisions.
In general, election day results versus long-term results do not correlate well – and seem to relate more to the idea of political stability versus a candidate’s actual political positions. Despite the fact that Republicans are generally associated with pro-market policies, Ed Clissold, chief US strategist for Ned Davis research, explained: “The markets tend to go up whether there is a Democrat or a Republican in the White House. Adjusted for inflation, the Dow Jones Industrial Average has gained an average of 3.8% per year under the Democrats since 1900, compared to 1.1% under the Republicans. Then this year, an analysis published on Forbes.com found that despite the fact that stocks rose after Trump was elected and fell after Obama, over the years the Dow Jones had risen 28% under President Trump. , compared to 62% under President Obama.
More critically, the truth is that stock market performance is separated from the economic reality of the vast majority of Americans, and especially those who have the most financial difficulties. According to the Federal Reserve, only 14% of Americans own a stock directly, and just over half – 52% – own stocks through a mutual fund or retirement vehicle. For the bottom half of employees, this figure drops to around a third. And ownership is also strongly correlated with race: with 61% of white families owning stocks, compared to 31% of black families and 28% of Latinx families.
So, like watching the Big Mac Index closely, watching the stock market performance the day after an election can be fun, but if you’re wondering which president will help the economy as a whole run well – and in particular, to perform better for working and middle-class families – here are some areas that deserve more attention on November 3, 4 and beyond:
1. Focus on quality jobs – not just any jobs.
While low unemployment rates are often cited as a sign of economic strength, they can mask the fact that Americans are working more for less, under terrible conditions. In a well-titled room, Low unemployment is not worth much if jobs hardly pay, The Brookings Institute found that “53 million workers between the ages of 18 and 64, or 44% of all workers, barely earn enough to live on. Their median earnings are $ 10.22 per hour and about $ 18,000 per year. And in all sectors, we are hearing more and more stories of workers supposed to work in inhumane conditions: if poultry workers claiming to have had to wearing adult diapers on the production lines given the lack of toilet breaks, i.e. 90% of women and 70% of men in the restaurant industry reporting sexual harassment in the pages of the Harvard business review. While Trump and Biden may both point to low unemployment rates during their tenure in leadership, either president should do serious work to ensure that American jobs offer working conditions. dignified, salaries that allow them to take care of their families, and ideally, opportunities for advancement and ownership to better share the spoils of a growing market.
2. Health care and education must be accessible and affordable.
This election in many ways became a referendum on the Affordable Care Act, which was passed in Obama’s second year in office. After already four years in office, Trump did not specify how he would replace ACA, and most worrying for the 54 million Americans with pre-existing conditions, how they would have access to insurance. “We don’t know where the president is on this”, says Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank. The economy cannot succeed without healthy workers – so if ACA is struck down by the Supreme Court on November 10, expect people and markets to suffer. And if the ACA stays; there will still be work to be done by any administration to reduce costs and improve the quality of care.
Likewise, education is the backbone of economic opportunity for individuals, while also being essential for America’s competitiveness in the international marketplace. And yet, over the past decade, public education has become even more unaffordable, with more than half of public universities rrequire families to contribute at least $ 10,000 per year (although, as noted above, it could be more than half of their family’s income). And in global studies conducted by the OECD, the The United States fell in the bottom half of the performance on math, science and reading. The results are so bad that despite belonging to an administration that typically showcases America’s strength, the Education Secretary Betsy DeVos said the following in response: “In the end, there hasn’t been a single study that shows American education is improving enough… Worse, the scores of our most vulnerable students continue to drop. . We are being overtaken not only by our global competitors like China and Russia, but also by countries like Estonia, Finland and Canada. “
This next administration must close America’s social mobility gap, which is driven largely by the two education inequity across all social groups and persistent structural racism in labor markets: A Pew study found that “Black and Hispanic women with college degrees earn only about 70% of the hourly wages of white men with similar training. “
3. Housing costs must stay in line with wages, and more families must become homeowners.
Owning a home has always been the foundation of the American Dream. More recently, however, Americans have simply fought for decent and affordable housing: with more than 550,000 Americans every day since 2016 experience roaming on a given night, and 1 in 4 Americans spending more than 50% of their income on rent. This rises to 72% for low-income households earning less than $ 15,000 per year and to 43% for those earning between $ 15,000 and $ 30,000.
Much of housing policy is local, but the federal government can provide incentives, whether through executive support or legislative leadership. Many prominent political ideas can be found in Senator Warren’s book U.S. Housing and Economic Mobility Act, which has been presented but has not yet been put to a vote. Ideas include greater down payment assistance in rural and urban areas, block grants as incentives for local communities, and the revision of the Community Reinvestment Act of 1977 to specifically address the racialized impacts of loans. Moody’s Analytics examined its potential impact, and “determined that the bill would reduce rents by 10% in 10 years”, concluding that the bill could “do a lot to address this growing housing crisis”.
Treating the markets as a leading indicator of economic health, rather than a lagging indicator of our larger economic reality, may cause us to focus on the slot rush when real money has to be made on the table. of poker – with patience, strategy, politics and diligence. Ultimately, businesses need regulation so that when economies grow, so do communities. And at the end of the day, we need an economic policy that doesn’t just address the rich who primarily own the market; but to the majority of Americans, who must live there.
Full disclosures related to my work available here. This article does not constitute investment, tax or legal advice, and the author is not responsible for any actions taken based on the information provided here.