This is a good post. One thing it does not recon with, but should, is that the economy and stock market seem to do better under Democratic administrations.
I don’t know, man. I’m not an economist. I’m not even particularly smart. But my growing sense is that the stock market continues to go up in a sort of autopilot end-of-history way. Investors are very broadly diversified, and quality information to inform individual valuations is scarce (not in a financial metrics way, in an is AI actually good and improving way). But most importantly, it would just be a bummer and kind of an inconvenient hassle if the market declined, so let’s not do that. All you have to do is nothing, just stay invested and keep your 401k auto contribution ticking. Doing anything else would require work, and worse, would implicate some uncertainty about whether you did the right thing at the right time. An object in motion stays in motion.
How much does it matter if the stock market goes up or down?
As Matt says, the median voter in presidential and senate races is 50-something-year-old white woman who lives in the Midwest in a fairly small town. Does she own stock?
Whether GDP is growing slowly or shrinking slowly, I think economic times are probably pretty tough for that woman.
While I think this argument is plausible, some of it feels a bit self-referential. Yes, AI is driving a lot of this, and that’s something concrete you can point to. But the rest is rather hand-wavey.
As Matt points out, the stock market hit record highs under Biden, even though this essay implies that big businesses must have feared Biden. Under Trump, the market should be even higher. It would likely be higher without the tariffs, but I don’t think that can account for the entire difference.
This sort of feels like Matt’s saying “the market is up because it’s up, and therefore, the market is up.”
I am glad to see LA councilwoman Imelda Padilla on Pod Save America authentically illustrating what a disaster people like her are on housing. I have ranted here about the lunacy of bureaucrats and for her to let her flag fly so openly is great.
Abundance Democrats, SHE is the problem! There are many many many people like her fucking op our housing supply. You need to stop them.
It is as if she shits in the potable water supply. Every time she is “doing the work” as she says she is taking another dump and reducing housing supply and increasing prices.
"Anti-Trumpers often seem to be unaware of what this project even is, but the basic idea is that institutions dominated by the educated professional class in America have become so fatally compromised by “woke” left-wing ideology that only a cleansing fire can save our civilization."
By this reading I am pretty sure most Trump SUPPORTERS are also unaware of what the project is, and that "anti-Trumpers" (read: pro-functioning government people) might be a lot closer in their conception of what's going on than are his voters. Do they hate "wokeness"? Sure. Did they vote for a "cleansing fire"? Very few did. Did they vote for the Heritage Foundation to take over the entire direction of government? I would guess a single digit percentage were aware that they were doing that.
Most Trump voters are not political people, let alone the kind of people who would actively vote for "destroy everything!" which is an extreme political position. They're just useful idiots who wanted cheaper eggs, with maybe a side of being able to make off-color jokes at work without HR getting involved. I think people SHOULD be able to have both of those things, to at least some extent; that is what they thought they were voting for, and it wasn't.
I encourage Matt to distinguish that the Republican party is not "pro-business," it is "pro-entrenched interests," or "pro-large corporations." Its policies are terrible for markets and for entrepreneurship. Calling them the party of "business" is like calling them "conservative" - it's applying a positively-connoted word to a party that 0% deserves it, out of habit.
So what you’re saying is yes, the business community did deliberately sabotage Biden’s presidency by causing inflation, and that they’ll do the same to any Democrat. It was painfully obvious, but it’s good to see you admit it as much as you railed against the idea of greed-flation (which is the same damn thing!)
But what to do about it? If every time a Democrat gets elected, the business community will deliberately punish the economy to sabotage the presidency because they want to see a Republican, well, that implies pretty radical solutions are the only real way forward.
They didn't do anything to Biden. With Obama he and his team under-stimulated and there was a slow recovery and high unemployment but no inflation. Biden thought people would be happier with a fast recovery and strong employment even if there was a little inflation. Turns out the Biden approach wasn't popular.
No need to get conspiratorial about easily understood economics.
Or maybe it was because the Fed was too stingy and the fiscal response was too tepid during Obama's term (the latter largely due to Republican intransigence). And it was the opposite during Biden's term.
I'm firmly convinced that had Trump won in 2020, he could have given every American citizen $50k in debt-financed cold hard cash and inflation would have been less than what we got under Biden, for the reasons described in Matt's piece today.
How is that possible? Everyone would have immediately run out and pissed that $50k away as quickly as they could - how could it not have caused inflation?
only a few people would have. shit over half of Americans would have used it to pay back debts
It wouldn't have caused inflation because business leaders trust Republicans to be less inflationary over time, even though the evidence suggests that isn't really the case. And personally they wouldn't have wanted to sabotage a Republican (and they wouldn't have wanted to face Trump's vindictiveness, either)
This article makes me think that the Superstar tech companies have become the equivalent of americas resource curse. Why bother creating new companies, maintain rule of law or functional institutions, or invest it new infrastructure when all you need to get rich is hold Nvidia stock?
It's actually the opposite - spending is so high because, for example, Google knows AI is an existential threat. Nvidia knows a domestic or Chinese rival could start selling a better cheaper product.
I don't understand this post. It's that businessmen like Trump and Republicans. Sure they do. So what? This is about the markets.
I get it that when it comes to polling on economics, it's no longer about objective takes on the economy but rather one's partisan leanings. Consumer sentiment, small business confidence -- it's all about who is in the White House (with the Republicans swinging a lot more wildly than Democrats). But the market? I thought that was about hardheaded, cold-eyed calculations about future profits. It's hard to believe the equities market is really thinking about future profits under Trump as it does its wild ride up the rollercoaster.
Take Walmart. Its share price is up 26% in the past year, 18% since Trump was elected. It's been flat the past few months but note that it is flat and *not* going down. If investors in Walmart think that tariffs being the highest since Smoot-Hawley, a slowing job market, erratic administration policies, and on and on, suggest that Walmart's future profits prospects are bright -- or at least not declining -- well, that reflects an interesting view of the world.
Alternative theory: most investors are biased and subject to unthinking herd behavior and when things fall apart they'll rush to sell their shares while their stock advisors cry to them, "Who could ever have seen this coming?"
P.S. One more thing. Is AI really driving the market up? A lot, sure. But substantially? By my calculation, the top 8 public firms in the S&P 500 pushing AI account for 31% of the index weight. Not nothing, but about 70% comes from everyone else. And that everyone else is doing fine! J. P. Morgan going like gangbusters. Walmart, as mentioned. It seems to me that the exuberant market spirits come from a lot more than AI.
> If investors in Walmart think that tariffs being the highest since Smoot-Hawley, a slowing job market, erratic administration policies, and on and on, suggest that Walmart's future profits prospects are bright -- or at least not declining -- well, that reflects an interesting view of the world.<
Walmart competes on cost, so a slowing job market and higher prices overall might push people who might otherwise shop at more upmarket competitors into its stores. Target is down 32% YTD!
I don't disagree with your premise, though. I think the slower job market and layoffs take a while to trickle down into lower personal consumption habits, which are sticky, especially in America where consumer credit is abundant. We're just not seeing it yet. (And shit, JP Morgan is due to profit off of more people carrying credit card balances!)
Hmm, you have a point. In the Great Financial Crisis, the S&P 500 fell more than 40% but at its worst, Walmart fell no more than 15%. Target's shell price fell by about half.
If Joe Biden had surged additional federal resources into the city, most residents wouldn’t have found it threatening, and the whole national debate would be about how the libs are wasting money on big cities again.
“””
So, we did this under Obama. It was called Jade Helm and West Texas was convinced it was a genocide program. The governor eventually sent Texas Rangers to be observers because of all the outcry. It was major national news.
I felt like all the hysteria around that exercise had been successfully memory holed. Admittedly I don't think the stock markets were concerned about it one way or the other.
Hello from Taiwan! Just wanted to flag that I’m back from my brief hiatus and will be hanging out with you all in the comment section again.
The comments section is like: https://www.youtube.com/watch?v=qfNReBBUk_w
Eat some stinky tofu.
I'm a pretty adventurous eater, but stinky tofu might just be a bridge too far for me.
There are different levels of stinkiness to the tofu, if you get it at a restaurant that doesn’t specialize it will be generally milder.
If you like aged cheese, there's a good chance you'll like it. There is a big gulf between the smell and the taste.
A friend of mine describes it as "feces on a plate"
It’s just pickled tofu that is deep fried.
Is that really it. The smell really kills certain parts of the night markets for me.
Are you in Taipei? What has been your favorite night market?
I'm partial to Tonghua
Do you like kimchi?
Welcome back, Ben! How’s it going so far?
It's hot, rainy, but mostly wonderful. Living in an Asian city with great mass transit and great food just checks a lot of my boxes.
Please post regular updates!
I've only been to Taiwan once, years ago, but the national parks there are staggeringly beautiful and of course the National Palace Museum is amazing.
Tariffs will hurt Amazon.
This is a good post. One thing it does not recon with, but should, is that the economy and stock market seem to do better under Democratic administrations.
I don’t know, man. I’m not an economist. I’m not even particularly smart. But my growing sense is that the stock market continues to go up in a sort of autopilot end-of-history way. Investors are very broadly diversified, and quality information to inform individual valuations is scarce (not in a financial metrics way, in an is AI actually good and improving way). But most importantly, it would just be a bummer and kind of an inconvenient hassle if the market declined, so let’s not do that. All you have to do is nothing, just stay invested and keep your 401k auto contribution ticking. Doing anything else would require work, and worse, would implicate some uncertainty about whether you did the right thing at the right time. An object in motion stays in motion.
How much does it matter if the stock market goes up or down?
As Matt says, the median voter in presidential and senate races is 50-something-year-old white woman who lives in the Midwest in a fairly small town. Does she own stock?
Whether GDP is growing slowly or shrinking slowly, I think economic times are probably pretty tough for that woman.
Somewhere around 60% of Americans own stock (https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx), so yes, the median voter owns stock.
To know whether the median voter owns stock, we need to know which 60% of Americans own stock
I’d be beyond shocked if stock ownership and voting were negatively correlated.
While I think this argument is plausible, some of it feels a bit self-referential. Yes, AI is driving a lot of this, and that’s something concrete you can point to. But the rest is rather hand-wavey.
As Matt points out, the stock market hit record highs under Biden, even though this essay implies that big businesses must have feared Biden. Under Trump, the market should be even higher. It would likely be higher without the tariffs, but I don’t think that can account for the entire difference.
This sort of feels like Matt’s saying “the market is up because it’s up, and therefore, the market is up.”
How big of a crash is coming? "[W]e can probably run pretty far off the cliff".
I am glad to see LA councilwoman Imelda Padilla on Pod Save America authentically illustrating what a disaster people like her are on housing. I have ranted here about the lunacy of bureaucrats and for her to let her flag fly so openly is great.
Abundance Democrats, SHE is the problem! There are many many many people like her fucking op our housing supply. You need to stop them.
It is as if she shits in the potable water supply. Every time she is “doing the work” as she says she is taking another dump and reducing housing supply and increasing prices.
Get her out of the way of true progress.
"Anti-Trumpers often seem to be unaware of what this project even is, but the basic idea is that institutions dominated by the educated professional class in America have become so fatally compromised by “woke” left-wing ideology that only a cleansing fire can save our civilization."
By this reading I am pretty sure most Trump SUPPORTERS are also unaware of what the project is, and that "anti-Trumpers" (read: pro-functioning government people) might be a lot closer in their conception of what's going on than are his voters. Do they hate "wokeness"? Sure. Did they vote for a "cleansing fire"? Very few did. Did they vote for the Heritage Foundation to take over the entire direction of government? I would guess a single digit percentage were aware that they were doing that.
Most Trump voters are not political people, let alone the kind of people who would actively vote for "destroy everything!" which is an extreme political position. They're just useful idiots who wanted cheaper eggs, with maybe a side of being able to make off-color jokes at work without HR getting involved. I think people SHOULD be able to have both of those things, to at least some extent; that is what they thought they were voting for, and it wasn't.
I encourage Matt to distinguish that the Republican party is not "pro-business," it is "pro-entrenched interests," or "pro-large corporations." Its policies are terrible for markets and for entrepreneurship. Calling them the party of "business" is like calling them "conservative" - it's applying a positively-connoted word to a party that 0% deserves it, out of habit.
It'd be fair to say trump is pro business owners.
THIS 100%
Trump cut the corporate income tax rate from 39% to 21%.
So what you’re saying is yes, the business community did deliberately sabotage Biden’s presidency by causing inflation, and that they’ll do the same to any Democrat. It was painfully obvious, but it’s good to see you admit it as much as you railed against the idea of greed-flation (which is the same damn thing!)
But what to do about it? If every time a Democrat gets elected, the business community will deliberately punish the economy to sabotage the presidency because they want to see a Republican, well, that implies pretty radical solutions are the only real way forward.
How old are you? Do you not remember Clinton or Obama?
times have changed, as evidenced by what they did to Biden.
They didn't do anything to Biden. With Obama he and his team under-stimulated and there was a slow recovery and high unemployment but no inflation. Biden thought people would be happier with a fast recovery and strong employment even if there was a little inflation. Turns out the Biden approach wasn't popular.
No need to get conspiratorial about easily understood economics.
They forgot to raise prices during Obama's term?
Or maybe it was because the Fed was too stingy and the fiscal response was too tepid during Obama's term (the latter largely due to Republican intransigence). And it was the opposite during Biden's term.
I'm firmly convinced that had Trump won in 2020, he could have given every American citizen $50k in debt-financed cold hard cash and inflation would have been less than what we got under Biden, for the reasons described in Matt's piece today.
How is that possible? Everyone would have immediately run out and pissed that $50k away as quickly as they could - how could it not have caused inflation?
only a few people would have. shit over half of Americans would have used it to pay back debts
It wouldn't have caused inflation because business leaders trust Republicans to be less inflationary over time, even though the evidence suggests that isn't really the case. And personally they wouldn't have wanted to sabotage a Republican (and they wouldn't have wanted to face Trump's vindictiveness, either)
At some point, the old “good for Wall Street, bad for Msin Street” attack is going to land
This article makes me think that the Superstar tech companies have become the equivalent of americas resource curse. Why bother creating new companies, maintain rule of law or functional institutions, or invest it new infrastructure when all you need to get rich is hold Nvidia stock?
It's actually the opposite - spending is so high because, for example, Google knows AI is an existential threat. Nvidia knows a domestic or Chinese rival could start selling a better cheaper product.
I don't understand this post. It's that businessmen like Trump and Republicans. Sure they do. So what? This is about the markets.
I get it that when it comes to polling on economics, it's no longer about objective takes on the economy but rather one's partisan leanings. Consumer sentiment, small business confidence -- it's all about who is in the White House (with the Republicans swinging a lot more wildly than Democrats). But the market? I thought that was about hardheaded, cold-eyed calculations about future profits. It's hard to believe the equities market is really thinking about future profits under Trump as it does its wild ride up the rollercoaster.
Take Walmart. Its share price is up 26% in the past year, 18% since Trump was elected. It's been flat the past few months but note that it is flat and *not* going down. If investors in Walmart think that tariffs being the highest since Smoot-Hawley, a slowing job market, erratic administration policies, and on and on, suggest that Walmart's future profits prospects are bright -- or at least not declining -- well, that reflects an interesting view of the world.
Alternative theory: most investors are biased and subject to unthinking herd behavior and when things fall apart they'll rush to sell their shares while their stock advisors cry to them, "Who could ever have seen this coming?"
P.S. One more thing. Is AI really driving the market up? A lot, sure. But substantially? By my calculation, the top 8 public firms in the S&P 500 pushing AI account for 31% of the index weight. Not nothing, but about 70% comes from everyone else. And that everyone else is doing fine! J. P. Morgan going like gangbusters. Walmart, as mentioned. It seems to me that the exuberant market spirits come from a lot more than AI.
> If investors in Walmart think that tariffs being the highest since Smoot-Hawley, a slowing job market, erratic administration policies, and on and on, suggest that Walmart's future profits prospects are bright -- or at least not declining -- well, that reflects an interesting view of the world.<
Walmart competes on cost, so a slowing job market and higher prices overall might push people who might otherwise shop at more upmarket competitors into its stores. Target is down 32% YTD!
I don't disagree with your premise, though. I think the slower job market and layoffs take a while to trickle down into lower personal consumption habits, which are sticky, especially in America where consumer credit is abundant. We're just not seeing it yet. (And shit, JP Morgan is due to profit off of more people carrying credit card balances!)
Hmm, you have a point. In the Great Financial Crisis, the S&P 500 fell more than 40% but at its worst, Walmart fell no more than 15%. Target's shell price fell by about half.
You should read Paul Krugman's linked post. It explains that the market is not hard-headed realists.
“””
If Joe Biden had surged additional federal resources into the city, most residents wouldn’t have found it threatening, and the whole national debate would be about how the libs are wasting money on big cities again.
“””
So, we did this under Obama. It was called Jade Helm and West Texas was convinced it was a genocide program. The governor eventually sent Texas Rangers to be observers because of all the outcry. It was major national news.
I felt like all the hysteria around that exercise had been successfully memory holed. Admittedly I don't think the stock markets were concerned about it one way or the other.
Yeah, it definitely was. I spent years sarcastically raising funds for a memorial to the victims of Jade Helm at various SV parties, though.