(Bloomberg) — Even investors with a lot at stake tend to agree: The stock market shouldn’t be a president’s top priority, especially when issues like war, blistering inflation and a pandemic are in play.
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Still, for practical purposes, there’s no getting around the disparity between the styles of Joe Biden and Donald Trump when it comes to the intersection of markets and politics.
On Twitter, the favored forum for politicians to boast about accomplishments, Trump posted about stocks dozens of times, treating a rising Dow as an alternative approval rating of his administration. Biden has yet to tweet about the market at all, despite a string of records in his first year in office.
Or consider State of the Union addresses. Trump touted a 70% rally during his term. Biden’s only mention of equities was to point out that sanctions stemming from the invasion of Ukraine knocked 40% off the value of Russian stocks and caused that market to close.
“I’m not getting the impression that they’re making decisions with the equity market at the forefront of their thinking,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said in an interview. “They’re just looking and making the decisions they think they need to make in terms of domestic policy and foreign policy — and that is what they’re supposed to do.”
At the same time, presidential silence on stocks is part of a shifting landscape for investors, one where they are left to fend for themselves amid a panoply of global threats that stretch well beyond the boundaries of Wall Street. With Biden’s blessing, Federal Reserve Chair Jerome Powell has stiffened his resolve against inflation, striking fear into markets everywhere. Tightening sanctions on Russia threaten to whip up price pressures even more.
Even Biden himself has made note of the difference in approaches. Before equities fell into a correction this year, he pointed out the strength of the market — but it was almost as an aside.
“By the way, the stock market — the last guy’s measure of everything — it’s about 20% higher than it was when my predecessor was there,” he said. “It has hit record after record after record on my watch while making things more equitable for working-class people.”
The otherwise lack of emphasis on market performance should not come as a shock to investors, considering that Biden’s platform included boosting corporate taxes and other agenda items that were obviously not aimed at juicing stocks in the short term. What is surprising is how much the stakes have grown, especially as investors also find themselves without the support of accommodating central-bank policy.
Biden’s contrasting style came into stark relief last month as Russia prepared for, and then launched, its attack on Ukraine, prompting an aggressive and unprecedented response in the form of financial sanctions from the administration and many U.S. allies. As Biden told Congress earlier this month: “A Russian dictator, invading a foreign country, has costs around the world.” Those costs have included an economically dangerous surge in oil prices and some bone-chilling volatility in the stock market.
Now, with Ukraine’s surprising strength in defending its government prompting speculation that Vladimir Putin will seek a peace deal, equities and oil have stabilized for the moment.
Yet the shakeup provided investors with some valuable information for the remainder of this presidency. The way Biden views wins and losses in his presidency clearly prioritizes issues he sees as more important — the lives and well-being of Americans and the defense of allied democracies — above the performance of financial markets.
“Our measure of success is really how real working families are doing,” White House spokeswoman Emilie Simons said Friday. “And we’ve seen a great deal of progress made on that front.”
The two presidents also differ on how to handle other important financial issues. Trump took to Twitter to pressure OPEC to boost production when energy prices started getting high, and he repeatedly criticized the Federal Reserve as it raised interest rates seven times during his term.
Biden, on the other hand, has chosen more quiet, private diplomacy to urge a boost in oil production to make up for shunned Russia’s crude. He’s also embraced the need for higher interest rates, urging Congress to confirm his nominees to the Federal Reserve because the central bank “plays a critical role in fighting inflation.”
“There’s so many other things going on right now that you could argue are much more important to civilization than some of the obstacles that Trump faced,” said Ryan Nauman, market strategist at Zephyr. “And he’s focused more on inflation — that should be probably his biggest concern, rather than the market.”
Another factor to consider going forward is that the shot clock on much of Biden’s agenda could be running out with the approach of the midterm elections in November, which historically tend to go against the political party of the sitting president.
That’s a risk to the Democrats’ current slim — and sometimes nonexistent — control of Congress. Many market participants have priced in a loss of the party’s legislative majority, according to Brian Nick, chief investment strategist at Nuveen.
“Starting with that assumption, which was the case before the invasion, then maybe that means they’re willing to tolerate a little bit more pain and maybe elicit some voter dissatisfaction if they think this is genuinely the right thing to do,” Nick said in an interview.
Nonetheless, many of Biden’s top priorities — repairing the nation’s crumbling infrastructure, alleviating wealth inequality, mitigating global climate change and avoiding a direct conflict with Russia — in the long run could arguably end up being beneficial to the economy and the American people, and therefore ultimately help the stock market, even if they ruffle feathers for a bit.
“You have to keep the bigger picture in mind,” said Scott Bauer, chief executive officer of Prosper Trading Academy in Chicago. “I do not believe they’re concerned about the market going down 10% or 15%. If that happens, it happens, as long as in the long-run, whatever policies they are trying to institute are benefiting Americans.”
Meanwhile, in the near term, RBC’s Calvasina says there’s a point at which the market could start to reflect fears about the economy or other factors. And the administration won’t ignore those signs, if and when they arrive. But that’s not the case at the moment.
“You can’t sit here and say, ‘The market falls X percent, and then they’ll start to care,’” she said. “It really is a question of what drives the market to any kind of low, what’s the conversation going on in the world or domestically that’s driving the market to a certain level.”
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