Joe Biden’s ineptitude has killed off the bull market

Political leaders can’t usually create bull markets, but they can create bear ones – and this is Biden’s bust. 

It is unlikely that Joe Biden is going to start tweeting about how great the stock market is doing under his administration in the way that Donald Trump used to. He has a little too much dignity, a quality that his predecessor was noticeably short on. Even if he wanted to, however, he would struggle to find the charts to boast about. 

Just over 12 months since he moved into the White House it is already shaping up into one of the more disappointing first Presidential years, at least as far as Wall Street is concerned. The S&P 500 is up by 16pc over Biden’s first year, compared with 24pc for Trump’s, and 41pc for the opening year of Obama’s first term and 24pc for his second. 

It is likely to get much worse from here on. 

The tech heavy Nasdaq index has declined 12pc this month, on track for its worst January on record. Unless there is a swift bounce back, this will be its worst month since October 2008. 

The way the market is selling off right now, Biden may well be the first President to deliver negative returns over his time in office since George W. Bush (although, in fairness, he will have to go some way to match the 77pc decline under Herbert Hoover). 

True, market performance typically does not have much to do with the person in the White House. Obama took office right after the financial crisis of 2008. He could hardly help presiding over a recovery. George W was sandwiched between the bursting of the dot com bubble and the 2008 crash. The charts were always going to look bad. 

And yet, this crash can largely be pinned on Biden’s ineptitude. Here’s why. 

First, on taking office the President, egged on by a coterie of ultra-Keynesian economists, made a massive bet that huge spending programmes could transform American productivity and growth. More than $3 trillion was spent on everything from green energy, to new infrastructure, to stimulus cheques and higher welfare payments. The result? As even mainstream Democratic economists such as Larry Summers warned, a spike in inflation. 

With prices rising by more than 7pc annually, the fastest rate since the early 1980s, the Fed has no choice but to start a series of rate rises to bring that under control. It may well take a full-scale recession to crush inflation. But none of that would have been necessary if Biden hadn’t spent so wildly. 

Next, an assault on business. Biden has not managed to get it through Congress yet, but he is intent on reversing Trump’s reforms of corporate taxes and imposing one of the biggest rises in recent history. Much like the UK’s soon-to-be-catastrophic rise in corporation tax, it will start hurting the economy and the stock market before it is even introduced. 

If the government takes more of company profits, then, obviously enough, there is less left over for investment, to pay out in dividends, or for higher salaries. There is no point in being surprised when that pushes equities lower. 

Thirdly, a weak, chaotic foreign policy. The embarrassing withdrawal from Afghanistan may not have mattered much, economically. It doesn’t count for a lot in the global economy. But Biden’s clueless approach to Ukraine, along with a German leadership that seems intent on turning the country into a Russian satellite, and a French President who sees it as just another opportunity for grand-standing rhetoric, is encouraging Russia’s President Vladimir Putin to invade. 

That is already playing havoc with market confidence, but it will be a whole lot worse when it actually happens, and energy prices spiral out of control, and half of European industry closes down. Under a stronger President, a fundamentally weak Russia would respect the border. If a war starts, it is his fault. 

Finally, Biden has started an ideological crusade against the tech giants. Competition policy has been handed over to a group of previously obscure, anti-business academics, gripped by the idea that size itself is a problem, rather than the impact on consumers. 

The result? We are about to witness a series of legal actions to break up the companies that just happen to be the most successful in the world right now, and which are spending unprecedented billions on creating new technologies. 

Tech is the most innovative and vibrant sector of the American economy, and the key driver of the markets. Hit that, and you hit the stock market as well. 

Whatever else it might be, under Joe Biden the business of America is not business any more. The President doesn’t boast about the performance of the stock market the way Trump did. It is unlikely that he especially follows it (although he might like to reflect that very few Presidents have been re-elected against the backdrop of falling equity prices). But it is already clear he has killed off the bull market – and it looks unlikely there will be any recovery under his Presidency.

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