Donald Trump continues to attempt to scare Americans into voting for him, painting a doom-and-gloom portrait of a collapsing U.S. economy should they elect Joe Biden president this November.
Wall Street and big bank economists, however, paint a very different picture.
According to their vision, not just a Biden victory, but a Biden victory accompanied by Democratics also winning control of both chambers of Congress, would fuel the most powerful and stable economic recovery.
Who says so? Well, Moody’s Analytics, led by Mark Zandi who advised Senator John McCain during his 2008 presidential run, concluded quite clearly in its recent report:
“The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda.”
Moody’s analysis affirmed what Biden had been trying to assert in the first presidential debate over and against Trump’s incessant interruptions: Biden’s economic proposal would create 7.4 million jobs. Moreover, the report elaborates, if enacted, Biden’s plan promises to return the economy to full employment in the second half of 2022, two years earlier than the projections in Trump’s plan.
And what about the crash of the stock market Trump prophesies under a Biden presidency?
Well, Goldman Sachs has alerted its clients that polls “suggest a ‘blue wave’ in which Democrats gain unified control of Washington is becoming more likely,” and they have informed their clients that such an outcome bodes well for a strong stock market performance.
Far from advising clients to sell stocks, Goldman’s chief economist Jan Hatzius wrote, in a report issued last Monday on the heels of a tweet from Trump predicting economic disaster, that, in fact, “all else equal, such a blue wave would most likely prompt us to upgrade our forecasts.”
Recent fluctuations in the market have been motivated by uncertainties regarding the passage of a fiscal stimulus package to provide relief for struggling Americans during the pandemic. Trump’s flip-flops on whether or not his administration will negotiate such a package have been the chief cause of this uncertainty.
The report from Goldman Sachs underscored, in particular, that a blue wave would “sharply raise the probability” of Congress passing a stimulus bill in excess of $2 trillion after the January inauguration.
In short, Wall Street even supports Democratic policy as better for the economy. Additionally, the long-term spending Biden has proposed on infrastructure, healthcare, climate change, and education are seen as positives for the long-term health and stability of the economy, such that even though the bank foresees increased taxes and regulations, these increases would be offset by these improvements to the overall economy. In the words of the report, “It would likely result in substantially easier US fiscal policy, a reduced risk of renewed trade escalation, and a firmer global growth outlook,” the report said.
Wall Street seems smart enough to take a larger view of the economy than Trump does, recognizing that the economic health and wherewithal of the average American has a lot to do with the success of the overall economy.
As CNN business writer Paul R. La Monica put it in his recent piece “Biden wants to undo Trump’s tax cuts. Wall Street is backing him anyway”:
“A Biden win could also lead to a slightly higher personal income tax rate for the upper middle class and the wealthy. But you can’t look at the tax picture without analyzing what the broader economy might look like with more stimulus coming from either Biden or Trump.”
Indeed, as one fund manager points out to La Monica, “ . . . any new policies that strengthen the middle class should give consumers more confidence to take out more loans.”
In other words, Wall Street is now looking for a trickle-up economic policy to ensure the ongoing creation of wealth and health of the economy.
The markets sent this same message for most of September. Last Monday, September 21, for example, after the S&P 500 index posted its first four-day losing streak since February and the Dow Jones Industrial plummeted 500 points, CNBC’s Fred Imbert pinned this decline on “fears about the potential worsening of the coronavirus pandemic, as well as uncertainty on further U.S. fiscal stimulus,” which had both “rattled traders.”
That brutal Monday for the stock market began a week that would end marking a four-week losing streak for both the Dow and the S&P 500, their longest losing streaks since August 2019.
While Trump continues to engage in his incessant denial of reality—whether it is the reality of the coronavirus, of systemic racism, or the economic distress Americans are suffering—the stock market has been seemingly refusing to participate in Trump’s panglossian denials of what we are all witnessing, should we care to pay attention, right before our eyes, particularly when it comes to Trump’s abject failure to manage, much less care about, the pandemic, as well as his penchant for generating political chaos rather than leading his party in passing more fiscal relief for desperate Americans.
As Brad Kinkelaar, a global portfolio manager at Barrow Hanley, told CNBC, “This is a health-care issue and we still really haven’t made any progress. We still don’t have a vaccine; obviously, there’s still no cure and we’re still figuring out how to deal with the crisis.”
According to Kinkelaar, the markets had, at least for a while, bought into Trump’s magical thinking that the coronavirus would just fade away without taking action with a national coordinated response, returning us to normalcy. He explained, “So it’s not surprising we’ve gone from a market that was essentially pricing in a resumption of normal activity, within a reasonable time frame, to one pricing in the notion that we haven’t figured this out yet.”
As strategists at another firm noted, “After a buoyant and hopeful summer, financial markets are cooling in the face of reality.”
Markets bounced back this week as prospects of a fiscal stimulus package improved, but also because the prospects of Biden victory and Democratic sweep of the Congress brightened.
It seems best to disregard Trump’s fantastic paintings of economic forecast and heed Wall Street’s crystal ball.
Tim Libretti is a professor of U.S. literature and culture at a state university in Chicago. A long-time progressive voice, he has published many academic and journalistic articles on culture, class, race, gender, and politics, for which he has received awards from the Working Class Studies Association, the International Labor Communications Association, the National Federation of Press Women, and the Illinois Woman’s Press Association.