President Joe Biden likes to ridicule the stock market. He never talks about bonds or interest rates. He frequently criticizes Donald Trump for keeping a sharp eye on the stock market as a leading indicator on the economy. Well, Biden might want to have another think about this stock market business because it's falling now, almost on a daily basis.
The broad-based S&P 500 is off 24% year to date signaling a bear market and a recession. The U.S. Treasury bond market has basically collapsed. Prices have plunged and interest rates have soared. U.S. government credit is still good, but Treasury market rates have gone up 3-4% points this year. The 10-year is nearly 4%. 30-year mortgages are 6.5%.
The inflation-fighting Fed will run its target rate to at least 5%, if not higher. The inflation rate is stubborn, around 8%. Core inflation, roughly 7%. The GDP tracker from the Atlanta Fed held its number for Q3 steady at 0.3% today, following two down quarters in the first half. None of this is good.
Really, Joe Biden should be reading the business pages. I'll be glad to help him out with a subscription. According to the Gallup poll, 58% of Americans own stocks. Hat tip to Liz Peek for that info. That's a lot of people to ignore, Mr. President.
In the second quarter, household wealth fell $6 trillion. That's mostly housing and stocks. Because of inflation, the typical working family has lost $4,200 in real income over the past year. Government pension funds are down 8%. The stock market is sending a message and it's not a happy one.
Every time Mr. Biden goes out there and talks about "zero inflation" and a strong economy, he's begging the credulity of every American. Nobody believes him. Kitchen table prices are rising. Portfolios are falling. It's not a good combination.
Mr. Biden inherited a booming economy with virtually no inflation from Donald Trump and, in slightly more than a year, turned it into a busting recession with record inflation—in just over a year. That's not an easy thing to do and still, today, despite what financial markets are telling him, what typical families are telling him, what parents are telling him, what the border crisis is telling him, what the crime wave is telling him... he will not listen.
The radical progressive economic model has failed, dismally. Mr. Biden has committed the cardinal sin of politics. He promised success and delivered failure. If the big government socialist model was going to succeed, it would have already succeeded. But it hasn't and Americans are a very practical-minded, common-sense group. If something's not working, either fix it or throw it out.
That's what this eye-popping Washington Post/ABC News poll is telling us. In key swing districts across the country, Republicans have a 21% lead. That's right, 21%, and Kevin McCarthy's "Commitment to America" is emphasizing all of the key issues on voters’ minds: inflation, economy, crime and so forth.
I'm sure there will be lots of polls in the next month that don't agree with each other, but it looks to me like the GOP cavalry is closing fast and if they sweep Congress, it's possible there is a stock market bottom. Maybe. One can hope, but right now, the stock market is very annoyed at Joe Biden's progressive policies and because it doesn't seem that he reads the business pages, he is in danger of missing some big-time shock and awe coming right at him.
That's what stocks are telling him. That's what interest rates are telling him. That's what polls are telling him. The cavalry is coming. That's my riff.
This article is adapted from Larry Kudlow's opening commentary on the September 27, 2022, edition of "Kudlow."