28 February 2024

Market Anxiety Could Affect the 2016 Presidential Election

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The U.S. stock market suffered an anxiety attack on Monday. In the political world, the key question is whether that will produce a parallel anxiety attack among voters. The market’s anxiety attack resulted in a drop of almost 600 points in the Dow Jones Industrial Average, a swoon that followed several days of volatility late last week triggered in large measure by China’s economic weaknesses and sliding stock prices. For those who are counting, Monday’s drop drove the DJIA to an 18-month low.

If you’re looking for political effects, disregard the fact that the first primaries in the 2016 presidential campaign are still more than five months away and the general election itself more than a year into the future. Any such event, coming as political jousting is increasing in intensity, has at least the potential to affect the political lay of the land, even if only subtly.

In this case, the market slide promptly produced a bit of China bashing, as Republican candidates Donald Trump and Scott Walker blamed Chinese economic manipulation for the problem. But in the long run, the more important effects of the market shock may be psychological.

History shows there is only a tenuous relationship between actual stock market performance and presidential election outcomes. For example: The Dow industrials fell during Jimmy Carter‘s four-year term, and he lost re-election in 1980. Later, it rose nicely during George H.W. Bush‘s term, yet he also lost his re-election bid in 1992.

So stock market levels alone aren’t an especially good leading indicator of a candidate’s or a party’s prospects. That may be particularly true in the current political environment in which mistrust of Wall Street is running high, as are feelings that the financial world’s results are detached from the real economy as experienced by most Americans.

Yet the market scare could well feed into the political situation in a more subtle way: It is the kind of event that could increase a broad sense of economic anxiety and uncertainty that already is widespread.

That underlying anxiety was on ample display in the latest Wall Street Journal/NBC News poll, taken in late July. In that survey, just 25% of those polled said they expect the economy to get better over the next year, and only 28% said the country is generally on the right track. Fears that the economy is going to get worse were especially prominent among rural, working-class and lower-income Americans.

Those aren’t the kinds of people most directly involved in the stock market, of course. But the polling data suggest that they are attuned to signals that something just isn’t right in the economy—and the stock market gave them exactly such a signal in bright flashing lights on Monday.

They also tend to be the kinds of voters who are most skeptical of economic globalization, and the prominent role that China and its problems are playing in the current market jitters may serve to underscore those feelings as well. If that’s the case, the effects of Monday’s shock may fade, but the anxiety it plays into figures to linger.

Click here to access the full article on The Wall Street Journal. 

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