The last time this happened, voters didn’t credit Bill Clinton. That may be a bad omen, or a good one.
If the stock market chose presidents, Joe Biden would be a shoo-in for reelection in 2024. The market rallied this month amid growing optimism about the economy, with the S&P 500 zooming 1.9 percent Tuesday on news that the consumer price index rose only 3.2 percent in October (compared to 3.7 percent in September). Stocks rallied again Wednesday on news that the producer price index fell 0.5 percent. Commentators are no longer debating whether the economy will experience a “soft landing” (i.e., a reduction in inflation without recession). The only question now is when it will arrive. The S&P 500 seems to have decided it’s already here.
But the stock market doesn’t choose presidents. Voters do, and polls continue to show they think the economy is in terrible shape. A Financial Times–Michigan Ross Nationwide Survey conducted November 2–7 is absolutely brutal on this point.
Inflation is better for people in debt since it makes it easier to pay back; a lot of farmers in the late 19th and early 20th century pushed for inflationary policies in part to make it easier to pay off bank loans.
Deflation is bad for two reasons. First, as mentioned, is that it doesn’t encourage people to spend sooner in the market. Second is that it encourages investors to pull out their money from the market, since they may get better returns stuffing it in their mattress.