The stock market is up because Bigger Government is great for Big Business?

by philg

The stock market has been up lately, perhaps in response to the Biden-Harris electoral victory. I wonder if this makes sense. Democrats promise a bigger government. The companies that are well situated to harvest contracts, bailouts, etc. are the biggest American companies. Investors could expect a disaster for small business owners and the working class (i.e., the folks who voted for Trump), but that shouldn’t discourage them from buying stock in publicly traded companies (i.e., the biggest U.S. companies).

From “The Biden Popular Front Is Doomed to Unravel” (New Republic):

It may turn out that Donald Trump was the one force keeping the Democratic Party together.

Trump didn’t sell out his supporters. In fact, his presidency saw something extraordinary, even if it was all but invisible from the country’s globalized cities: the first egalitarian boom since well back into the twentieth century. In 2019, the last non-Covid year, he presided over an average 3.7 percent unemployment rate and 4.7 percent wage growth among the lowest quartile of earners. All income brackets increased their take. That had happened in the last three Obama years, too. The difference is that in the Obama part of the boom, the income of the top decile rose by 20 percent, with tiny gains for other groups. In the Trump economy, the distribution was different. Net worth of the top 10 percent rose only marginally, while that of all other groups vaulted ahead. In 2019, the share of overall earnings going to the bottom 90 percent of earners rose for the first time in a decade.

The reasons for Trump’s success are not yet clear. They may well have involved his unorthodox policy choices: above all, limiting immigration.

So the good times for the elites might be even better soon! That’s a great reason to purchase stock in America’s largest companies owned by elites, managed by elites, and mostly employing the reasonably elite).

14 thoughts on “The stock market is up because Bigger Government is great for Big Business?”

  1. The country has too much liquidity and not enough consumer or capital goods and services or capital goods and services to spend it on, so we have financial asset inflation.

  2. I think the more likely explanations are asset price inflation caused by big increases in the money supply and increased predictability now that the election has been decided and it appears that the Republicans will keep control of the Senate.

  3. We all know who voted for the Obama dream: GREENSPUN. Trump’s triump was forcing the Powell to lower interest rates & expand quantitative easing. His immigration & China policies weren’t all that significant outside media attention.

    25,000 was the point in the stock market where retail investors finally piled in. Unlike past cycles when the stock market collapsed right after the retail investors got in, Trumps push for new quantitative easing got it to 30,000.

    It may be that Biden’s lethargy on the economy is what causes the masses to finally lose their shirts.

    • It’s all fun and games until this bubble market bursts, crashes, and you can’t lower interest rates to ease the pain, because they’re already at rock bottom, despite “the best economy in history.” If Trump’s pre covid term wasn’t the proper time to raise interest rates, when is!? When we hit the mythical 5-6% GDP growth republicans fantasize about? Republicans keep inventing new ways to screw us economically. Republicans love to blame democrats for spending, but the truth is they’re the ones who are addicted to credit card spending, so long as it only goes to folks who don’t need it; large corporations, millionaires and billionaires.

    • Senorpablo-

      Since when do Democrats want to control spending? Why call it a Republican problem?

    • Sam – Since, for the last 40 years, every Republican president has increased the budget deficit, while every Democratic president has lowered it. Reality versus the con/sales pitch/propoganda. That’s how.

  4. I’m very pessimistic. I agree with Mememe and lion2, and I think the bubble is going to burst sometime in late January or early February and we’re going to see a 30-40% market correction. We have a trifecta of Bad Things coming this winter:

    1) Increasing COVID-attributed deaths reaching 3,000 per day by the end of this month. We’re going to see continued shutdowns and lockdowns and hospital systems cracking up under the pressure.
    2) Awful holiday season sales because there aren’t going to be any new stimulus checks arriving before Dec. 25th.
    3) The retail investors currently flooding the market aren’t tethered to reality.

    The vaccine rollout isn’t going to start having any measurable effect for months to come. I expect the logistics of distributing the Pfizer vaccine (-94 degrees! 15,000 pounds of dry ice per plane from Europe!) to be daunting, to say the least. Less so the Moderna vaccine, but it’s still got to be at -4F. Coronavirus is going to be kicking us hard into the Spring, more businesses are going to go under (NJ has already lost 1/3rd).

    Right now there were people in Miami lining up around the block and camping out for a chance at a free $250 Publix gift card to buy food. They ran out of cards. These people are not going to be shopping for gifts at the local Best Buy. “It’s sad to see how much need there is. How the need is so much more than our ability to give,” added Suarez.”

    https://miami.cbslocal.com/2020/12/01/free-gift-publix-gift-cards-miami/

    And I think the Republicans are going to lose the Senate, too. The President has become completely unhinged with his attacks on Kemp and the Georgia Secretary of State. Yesterday he called for Kemp to cancel the runoff elections! It’s a madhouse. He’s going to succeed in making people stay home in a runoff election, which usually have low turnouts anyway. Kamala Harris is going to be the tie-breaking vote in the Senate. I think at this point the Democrats are rooting for Trump to keep up the crazy for another month, so they can take both Senate seats.

    https://miami.cbslocal.com/2020/12/01/free-gift-publix-gift-cards-miami/

    An auto. dealership I work with is trying to finalize its December Holiday mailing and they are deeply conflicted about how much money to spend. They are having real problems forecasting sales figures.

    I think the current market gains are a phantasmagorical illusion, based on some artificial sense of “relief” that the “transition” to the Biden Administration is going to be smooth. The real economy is going to get a lot worse before it gets better.

  5. I just got back into the stock market after investing conservatively for a few years in CDs…which have turned to shit because of the Fed lowering interest rates.

    People are ready to spend money after covid. Things are going to boom next year. We all will be celebrating and spending like drunken sailors on leave. Travel, especially, will take off.

    • Jim: next year when? Do you think by Spring? Is that just a matter of betting on the whole COVID thing disappearing by then, with or without the vaccines?

    • Alex…I live at the Port of Los Angeles. Container ships are backed up from here to Catalina Island waiting to unload their goods. But, yes, probably March/April before things start to look up.

    • Jim, I live near the port also. Ships are almost always backed up this time of year, are they not?

    • Senorpablo…no they are not. I worked in the industry for 36 years. Ships are backed up usually in the summer months, when they deliver goods for Christmas. Because of Covid, you’re seeing the delay now.

      Besides that, the twin ports of Los Angeles/Long Beach are reporting record setting cargo movements…a great sign for the coming year.

    • Next he’s going to turn on Giuliani for not bringing him the results he wanted. Giuliani will beg for forgiveness and then he’ll cut a deal! It’s all coming down.

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