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.
Alright, then what would people be waiting on to buy in a deflationary environment that they don’t wait for in an inflationary environment?
“Econ 101”? Anything that I can get you to not buy by convincing you it’ll be on sale in a month or two. New car, a house, electronics, IDK, cookware?
Actual stock market example? Investment is when you put money in now, in the hope that what you get in the future will be worth more than the money. If the value of money goes down, anything that doesn’t follow the money as it falls is a good investment. If the value of money goes up, any investment has to not only rise, it has to outperform the currency to be worth it. The idea is that inflation makes saving pointless, so money moves from the piggy-bank into the economy, and is spun into growth, while deflation makes saving pretty smart, and pulls money from the economy into savings. That’s why the recession in the seventies was such a big deal: “stag-flation” saw both inflation, and stagnation of the market, which is not typical.