Could the Stock Market Burst Biden’s Bubble?
Bad economic policies may catch up with Biden’s elite supporters just in time for November
With Joe Biden’s new elite supporters comes a new elite problem: The stock market.
Democrats have historically been dismissive of the wealthy’s worries — Biden no longer can be. The unwinding of a stock market pumped up by interest rate reduction expectations could hit Biden’s elitist supporters at the worst possible time and could be the fatal blow to a candidate already politically encumbered by his economic performance.
Democrats have historically claimed to champion the little guy. Biden styled himself as lunch–bucket Joe from Scranton — his return trip just days ago being only the most recent example. Reality is very different. Both the Democrats and Biden now represent America’s elites in income, education, and walk of life. No better evidence of this came less than a month ago in New York when a Biden fundraiser with Obama and Clinton pulled in over $26 million and attendees paid up to $500,000 for the most exclusive access.
Sharing the wealth of his new friends also means sharing their concerns about their wealth: The stock market. Democrats used to dismiss and disdain stock market performance If the stock market fell, they dismissed it as not representing the real world. If the stock market rose, they disdained it as excessively profiting off others. Not anymore. The elite’s problem is the Democrats’ problem; in particular, it is Joe Biden’s problem — and there is a lurking problem.
An Overvalued Stock Market Is a Problem
There are indications that the stock market is overvalued and that its rise has far outpaced the economy. The stock market’s runup has been fueled largely by the expectation of a run down in interest rates: The belief was that Federal Reserve interest rate cuts would offset the slowing economy that resulted from the higher interest rates needed to cool the inflation that Biden’s profligate policies helped stoke.
The plan was to cut rates up to three times — a process that began early in 2024. In anticipation, money poured into the stock market and it responded accordingly.
But inflation has not cooperated. Despite the Fed’s dramatic actions, it has remained stubbornly persistent. Rate cut expectations kept getting pushed back. The latest inflation report was just the most recent indication that inflation refuses to get to the Fed’s 2 percent target and expectations are now that rate cuts may not come until September and there may be only two (some have even floated the idea that there may be none).
As a result, a waiting (and a worrying) game has begun for Biden.
