The stock market began the Biden era with a boom. But heading into the midterm elections looks more like a stalemate.
Entering Monday, the S&P 500 had advanced just 13.2% since President Joe Biden took office in January 2021. That’s the second-worst performance in a president’s first 1,022 calendar days in office behind former President Jimmy Carter, according to CFRA Research.
The struggles in the market are largely linked to high inflation, which has prompted the Federal Reserve to launch a barrage of punishing interest rate hikes.
Of the 13 presidents since 1953, Biden ranks ninth in stock market performance at this point in office, trailing only former presidents George W. Bush (-21.6%), Carter (-2.6%) and Richard Nixon (-7.2%) passed ) and Lyndon Johnson (+9.6%), according to CFRA.
In contrast, Biden’s two immediate predecessors saw the stock market rise heading into their first midterm elections. According to CFRA, the S&P 500 rose 58.5% in the first 1,022 calendar days under former President Barack Obama and 36.2% under former President Donald Trump.
Of course, the stock market is not the economy, nor should it be seen as a barometer for governance. Good news for Main Street is sometimes considered bad news for Wall Street.
Despite recent market losses, the job market remains historically strong. The unemployment rate is near half-century lows and total employment has returned to pre-Covid levels.
And it’s worth noting that stocks soared in the early days of the Biden era. The S&P 500 rose 27% in 2021 as the economy bounced back from Covid-19.
“The first year was incredible. And then we got a lot back,” said Sam Stovall, chief investment strategist at CFRA Research.
Battered by the Fed’s all-out war on inflation, the S&P 500 is down 20% this year, on track for its worst year since 2008.
Biden’s underperformance in the stock market is important because many Americans have exposure to stocks, either directly or indirectly in their 401(k) and pension plans. This year’s selloff has removed trillions of dollars from nest eggs, 401(k) plans and college savings plans.
Market volatility is also eroding consumer confidence. A CNN poll found 75% of voters believe the economy is in recession.
Some of the reasons for the 2022 market sell-off were largely out of Biden’s control, including Russia’s invasion of Ukraine, Covid-related supply chain headaches and the Fed’s late response to inflation.
Other factors, such as whether Biden overstimulated an already strong economy with his American Rescue Plan, will be debated by economists for years to come. (A paper from the San Francisco Fed says that fiscal support may have helped fuel inflation.)
Stock markets may bounce back from recent losses, especially if the United States avoids a recession or inflation cools enough for the Fed to stop reining in the economy. Goldman Sachs told clients on Monday that it is “highly credible” that the Fed will tame inflation without triggering a recession.
On the other hand, retirement accounts can shrink even further if a recession materializes.
“We don’t think it’s over,” Stovall said. “There’s a good chance there’s no bottom.”
Presidents often get too much credit when things go well and too much blame when things go wrong. But Biden’s poor market performance reflects the broader economic challenges looming on voters’ minds in these midterm elections.