As of writing the S&P 500 in the US is up nearly 15% year to date. That would be a decent annual return, but we’ve not yet notched six months in 2024 so it’s a very impressive return for half a year.
Recently a poll conducted for the Guardian found 49% of Americans believed the S&P 500 was in the red this year. Still, that’s an improvement from September 2023. Back then 59% of Americans thought the S&P 500 was down for the year. At the time it was up 16% and finished up 26% for 2023.
Unemployment? That’s never been worse, at a 50 year high according to 49% of Americans. Though in reality, it’s under 4% and nearing a 50 year low.
The economy? That’s a stinker too apparently. 56% of Americans believe the place is in recession (which is 6 months of negative growth). Nope, not correct either. There hasn’t been a quarter of negative GDP in the US since Q2 2022. Either way, 58% of Americans believe the recession the US isn’t actually having is Joe Biden’s fault.
Inflation? 72% of Americans believe it’s increasing. In truth, inflation is still trending downward over the last year. And it has been trending down since the peak of 9.1% in 2022. Not only that, wage growth is ahead of prices.
Depending on a person’s circumstances, an economy certainly might feel in a recession to someone personally, or their location might be experiencing a downturn, but market data is inarguable. If stocks are up and someone thinks they’re down, it’s all about what they feel (or what they’re hearing) instead of the facts. In this instance, what they feel, or want to feel, is that things are bad.
This isn’t a Joe Biden defense or cheer fest. Doubtless, if Donald Trump were the president, many of the same people who currently think things are bad would probably think they’re great, and vice versa. Yet it is notable more than half of independents also believe the US is in a recession
Overall, what is promoted or not promoted to people can leave them feeling conditions are a certain way. A good example is oil production. The US has never produced more oil and leads the world in oil production. Both sides of politics in the US seem to be avoiding this achievement, presumably because of their own ends.
The Democrats, presumably because they’re less positive on oil, and it contradicts their climate change message and focus on green energy, so they don’t want to draw much attention to it. The Republicans, presumably because they’re quite pro-oil, and they’re keen to portray the Democrats as shutting down oil and gas. High oil production is something they’d happily take credit for.
Clouded facts and misinformation might be why Americans are lacking in trust.
In 2023, Gallup found that confidence in many US institutions was at, or near, rock bottom. Small business (65%), and the military (60%) saw the highest confidence ratings, followed by the police (43%). Institutions with the lowest public confidence were the combined US houses of politics (8%), while big business and television news (both 14%) were on the next rung up.
With this lack of confidence and the general feeling that things are bad, what are the implications for investors? It’s partly a political malaise and due to upcoming the US presidential race, things will get more political. Politics will dominate the second half of 2024, but nobody knows how any of it will play out. The only guarantee? There will be plenty of huffing and puffing we should be prepared for.
What should we expect in either circumstance? Who knows, but financial markets and the US economy are doing just fine right now. We should expect something of a business as usual response if Biden (or someone else on his side) was re-elected.
Trump’s agenda revolves around trade sanctions, extending tax cuts, gutting regulations and red tape. There’s also the concerning talk about avenging political opponents, expanding executive power and exerting more control over monetary policy and the judiciary. However, there was plenty of Trump bluster pre his 2016 win that never came to pass.
Investors may do well given the stock market would like lower rates, fewer restrictions and tax breaks. On the negative, if Trump’s fiddling around with monetary policy, low rates for the sake of low rates would be inflationary. The biggest concern is what’s said if Trump loses. Given he did not accept losing in 2020, why would he in 2024?
There is some danger in telling people elections are stolen, the stockmarket’s never been worse, the economy’s in the toilet and the other guy will make things a lot worse. People might be inclined to believe you.
We were told Obama would be end of days. He wasn’t.
We were told Trump would be end of days. He wasn’t.
We were told Biden would be end of days. He wasn’t.
The last time we saw a genuinely torrid run for financial markets across a presidential period was back in the days of George W. Bush. For context, that period saw the tail end of the dotcom bubble, 9/11, wars in Iraq and Afghanistan, and it was topped off with the global financial crisis.
Investors who were globally diversified across multiple asset classes may not have seen a world beating return, but they did retain, and continued to grow their wealth across the George W. Bush Presidency. Those who were all in on large cap global stocks didn’t do so well and had to be incredibly disciplined to stick with their singular strategy that ended in the red.
This isn’t suggesting large cap global stocks are in for turmoil, merely that if we crowd into a narrower and narrower asset class, we’re more and more exposed if that asset class doesn’t like the weather out there. There’s always an underperformer, so don’t have a preference for anything.
The message? Keep doing what you’re doing. Expect volatility. Stay diversified. Rebalance when your adviser recommends it. Ignore the huff and puff in the media. The US President remains just one variable in a constantly changing world. America will survive another presidential election.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
