September is a critical period in the presidential election race. Voters start paying closer attention to things that matter to them. And, yes, it’s mostly about the economy. As a reflection and beacon of the economy, U.S. stocks have bounced back from their coronavirus plunge. They are breaking records as they begin rescuing wage earners’ market-based retirement funds.
Many fence-sitting voters don’t like President Trump’s intemperate tweeting and attacks on his political foes. However, if the economy and its not-so-evil twin the stock market continues on its pace, Trump’s chances for reelection will be excellent.
Democrats offer a more avuncular and personable choice in Joe Biden, who credibly swears that he is not a left-wing socialist. But charisma aside, Biden’s tax plan — socialist or not — will roll back Trump’s historic 2017 cuts. What became a trailblazing pace could turn into either stagnation or a downturn as investors and corporations put their money where the tax shelters are.
The recovery has been breathtaking. The S&P 500 bottomed out on March 23, 2020, when the coronavirus took root. From that low the index us up 60%. If the average gain of just .5 percent continues through Election Day, it would be an epic and historic rebound to a potential 3,630.
That comeback could be bolstered by cash infusions from the Federal Reserve, which always reacts to positive indicators and investor optimism. If and when the COVID-19 vaccine emerges to stamp out the pandemic, the economic recovery train will finally leave the station.
President Trump, of course, would like to be the conductor. Incumbent presidents typically get all the blame, but only half the credit for the state of the economy. Half the credit is a good thing when you consider this: Since Ronald Reagan ran for reelection in 1984, the S&P 500 is nine for nine in picking presidential campaign winners. When the index was down, the incumbent’s party lost.
However, there are more wild cards in the 2020 election than normal. Democrats believe that just bragging about a resurging economy won’t help Trump win. Aside from how polarizing he is, some analysts don’t trust the correlation between the S&P and elections is really valid.
Smart money is on two factors affecting the outcome of the election:
If Trump loses, it will because of how his administration handled the COVID pandemic. Again, it’s the numbers: More people in the United States contracted the virus and died from the disease than any other country.
If Trump wins it will be because people see the economy is doing better. Then there’s the law-and-order issue, which the Democrats have only recently acknowledged.
With the economy, the President only gets half the credit. With the pandemic the Democrats will try to give him 100% of the blame for the over 100,000 deaths so far. As for the violence in the cities, Democrats will try to take none of the blame.
The irony is that no president has the of power to control the world’s largest economy nor nature’s most infectious virus.