The takeaway …
The election is one year away, and President Joe Biden has some work to do. According to a The New York Times/Sienna College poll, Mr Biden is losing to Donald Trump in five of six pivotal states. Should forecasts hold, Mr Trump could very well carry the Electoral College by at least 300 votes, according to The New York Times.
The glue that has held The Democratic Party together for the last six-plus years has been their antipathy toward Mr Trump. According to some of the responses gathered by the poll, more Democrats appear willing to hold their noses and vote for The Man from Mar-Lago, blaming The Man from Scranton for their personal economic malaise. Even in the midst of civil and criminal proceedings, Mr Trump’s perceived performance on the economy puts him ahead of Mr Biden in the minds of some of the electorate.
According to The New York Times, 59% of voters trusted Mr Trump on the economy as opposed to 37% who put their faith in Mr Biden. The 21st century version of the culture wars does not impress the voter. They are more concerned about the economy’s performance and are apparently underwhelmed by Mr Biden’s sales pitches on the environment, social and racial issues, or the performance of Bidenomics.
Voters are concerned about high interest rates and inflation as they observe the purchasing power of their dollar continuing to collapse. I suspect the mantra out of the Federal Reserve, that rates may stay higher for longer, is also spooking voters, whether they are members of the investing community or not.
Regarding higher (interest rates) for longer, the markets, according to investor Michael Kao, have not fully digested what higher for longer actually means. Could it mean that the Federal Open Market Committee will follow Neel Kashkari’s lead and get hawkish on raising the federal funds rate again? Or does it mean that rates will remain at this level for a while?
Either way, higher rates mean the possibility of lower asset values making access to capital more expensive and less available to businesses. Less capital means making adverse decisions about labor i.e., layoffs.
I thought at first that Mr Biden would take the opportunity to pass the buck on higher interest rates and higher consumer prices by dumping blame for the country’s economic ills on to the Federal Reserve. On further reflection, that would be a waste of political energy. His two trillion dollar economic and legislative initiatives had to be underwritten and the government has no better underwriter than the Federal Reserve.
The voting public tends to place glory or blame on a president for the economy’s performance. This misallocation of blame or kudos stems from a flawed comprehension of what the economy is. The President does not create market activity. His government produces nothing thus has nothing to sell into a market. Economy is about moving commercial value and currency through various markets that lie between producer and end user. Neither Messrs. Biden or Trump have that responsibility or juice.
It would behoove Mr Biden to energize the markets by using the bully pulpit of persuasion. Persuasion is the prime tool of a president. The polls are reflecting that Mr Biden is not spreading much in terms of energy.
Alton Drew
7 November 2023
(Purchase my latest book on the political economy at amazon.com/author/altondrew )
The stats …
30-day Federal Funds Futures and Options: 94.695
Discount Window rate: 5.50%
Interest on Reserve Balances: 5.40%
Effective Federal Funds Rate: 5.33%
2-year Treasury: 4.93%
10-year Treasury: 4.58%
Sources: CME Group. Board of Governors-Federal Reserve System. Bloomberg.
Disclaimer: The data and output from this blog post does not constitute investment or legal advice and is not a personal recommendation from Alton Drew. Nothing contained herein constitutes the solicitation of the purchase or sale of any futures or options. Any investment activities undertaken will be at the sole risk of the reader. Alton Drew expressly disclaims all liability for the use or interpretation (whether by visitor or by others) of information contained herein. Decisions based on this information are the sole responsibility of the reader. Any visitor to this page agrees to hold Alton Drew harmless against any claims for damages arising from any decisions that the visitor makes based on such information.
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