Benzinga - Following a successful midterm election, Joe Biden is all set to begin the second half of the first term of his presidency.
Biden Traverses Bumpy Road: The ride for Biden thus far has been bumpy. The ascension to the highest office did not go smoothly as his predecessor Donald Trump took exception to the election verdict and vehemently called for nullifying it.
What happened just ahead of the inauguration on Jan. 20, 2021, marked one of the darkest phases in American political history, as Trump fanatics stormed Capitol Hill and incited violence. Once the dust settled down and the president got back to regular business, it was fairly smooth sailing for the first few months amid an economy that was slowly getting back on its feet following the COVID-19 ravages.
Biden's first biggest challenge came in the form of galloping consumer price inflation. Fiscal and monetary stimuli, which were benevolently bestowed to kickstart an economy suffering from the COVID-19 pandemic, began to stoke pricing pressure. After bottoming at 0.3% in May 2020, the annual rate of inflation reversed course and went past the Fed’s target of 2% in March 2021. It was a steep climb thereafter until June 2022.
Source: Bureau Of Labor Statistics
The Fed had to act to rein inflation, although critics blamed the central bank for a delayed policy response. Monetary policy normalization started in March 2022 but financial markets began a downtrend ahead of it, pricing in potential rate hikes and their impact on economic growth.
The Russia-Ukraine war could not have come at a worse time. The war in Eastern Europe put further upward pressure on prices, fanning inflationary pressure further.
Here’s a look at how Biden’s tenure compared with that of Trump and his predecessor Barack Obama on various fronts:
For comparison purposes, Barrack’s first two years of his second term (2013-14) and Trump’s first two years (2017-18) are considered. It is important to take cognizance of the fact that an apples-to-apples comparison is unlikely, given the different sets of economic and geopolitical variables each of them may have faced during their tenure. One can argue that the economic condition is to some extent a function of the policies of an administration.
Economic Growth: Gross Domestic Product, a broader measure of broader economic performance, during the first year of Biden’s presidency, benefited from a strong rebound from a 2.8% decline amid the pandemic in 2020. As the economy rebounded big in 2021, growth shot up sharply to 5.9%, thanks to stimulus measures.
His predecessors’ reigns experienced fairly hassle-free growth, in line with slightly below the long-term trend. One should remember here that before COVID-19, the economy settled in a range of around 2% after it emerged from the Great Recession of 2007-2009.
Source: Self-generated chart using Bureau Of Economic Analysts data
*2022 growth is an estimate by the Conference Board as official numbers for the full year aren’t yet available
Market Performance: Biden was unfortunate enough to be caught in the maelstrom of multiple headwinds that pressured the stock market. The stock market is often considered a barometer of a nation’s economic health, as it reflects the fortunes of companies across the sectors that often serve as the lifeblood of the economy.
The post-COVID-19 recovery that manifested in the stock market took the major U.S. averages to record highs in 2022 and the descent from there was steep, tempering the average returns of the S&P 500 for the two-year period.
The SPDR S&P 500 ETF Trust (NYSE: SPY), an exchange-traded fund that tracks the performance of the S&P 500 Index, rose 5.3% during the two-year period under Biden.
Obama’s average two-year return during his second tenure was better than that of the comparable measures for his two successors.
Source: Self-generated chart
Popularity Rating: Biden started his presidency on a positive note from the perspective of approval ratings. Immediately after his inauguration, he enjoyed an approval rating of 53%, according to data compiled based on all polls by FiveThirtyEight. By August 2021, the percentage of people who approved of him fell below those who disapproved of him. At the end of 2022, the proportion was 51.3% to 43.3% against him.
The comparison with Trump shows that Biden had an upper hand in terms of popularity over most of the first two-year period.
Source: FiveThirtyEight
FiveThirtyEight’s comparison of Biden Vs. Obama used combined data from the first two years of both tenures of Obama. It shows that Obama enjoyed a better approval rating than Biden throughout.
Source: FiveThirtyEight
Way Ahead Risk-Laden: The U.S. economy is facing the prospect of a recession and uncertainty over the fed funds rate trajectory is continuing. Geopolitical risks abound, with the Russia-Ukraine war ongoing and the relationship with China continuing to remain lukewarm, with the looming threat of flaring up any time.
Additionally, with the midterms, Democrats have ceded the control of the House to the Republicans, which could mean more wrangling over policy measures. The one aspect where Biden won hands down was a slew of legislations he passed, taking advantage of the control his party had over Congress in the first two years.
Biden is likely to find the going tough in the second half of his term and it remains to be seen how he and his party shepherd the economy and nation through these challenging times.
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