Stocks fell so much in the first half of 2022, that the stock market had its worst first half in 52 years. The S&P 500 Index had a first-half plunge of 21%, its worst performance since 1970. The stock market’s value is lower now than when Joe Biden took office.
CNBC notes that the “tech-heavy Nasdaq” stock index “has been hit especially hard this year. The index is now more than 31% below its Nov. 22 all-time high. Some of the largest technology companies have registered sizeable declines this year, with Netflix down 71%. Apple and Alphabet have lost roughly 23% and 24.8%, respectively, while Facebook-parent Meta has slid 52%.”
Tesla stock had its worst half-year ever. Amazon had its steepest drop in stock price over a half-year period since 2001. Some analysts expect the stock market to fall by an additional 20%. “We do not believe the stock market has bottomed yet and we see further downside ahead. Investors should be holding elevated levels of cash right now,” said George Ball, chairman of Sanders Morris Harris. “We see the S&P 500 bottoming at around 3,100,” as corporate earnings fall, taking stocks even lower.
The decline in the stock market reflects a weak economy. The Atlanta Federal Reserve Bank estimates that the economy shrank by 1% in the second quarter of 2022, after falling by 1.6% in the first quarter of 2022. That suggests that America is already in a recession. The shrinking economy reflects a huge rise in America’s trade deficit. In the first quarter of 2022, American exports decreased by 9.6%, while imports grew by 17.7%; U.S. productivity dropped at a 7.5% annual rate, the most since 1947.
Inflation has risen at an alarming rate. The Consumer Price Index (CPI), the chief measure of inflation, soared 8.6% over the past year, the biggest increase since 1981. Producer prices have also recently skyrocketed, at the highest rate ever measured. Wholesale price inflation has reached double digits, 10.8% in May.
The Federal Reserve is belatedly taking steps to try to get inflation under control, such as raising interest rates. The president of the Federal Reserve Bank of Cleveland says she supports a an interest rate hike of three-quarters of a percentage point in July if current economic conditions persist. In June, the Fed previously raised its benchmark interest rate by three-quarters of a percentage point, the largest increase since 1994.
But inflation remains much higher in the U.S. than in many European countries: Inflation is just 5.2% in France, and 2.9% in Switzerland, even though European countries are more affected by price hikes due to the war in Ukraine, and disruptions in the supply of oil and gas to Europe from Russia.
Under Trump, the U.S. economy outperformed Europe, especially during the pandemic year of 2020, when Britain, France and Italy experienced much sharper economic declines than the U.S. The U.S. economy shrank 3.5% in 2020. The economy shrank much more in Europe: 7.9% in France, 9.9% in the United Kingdom, and 8.9% in Italy.
But that has changed under Biden. While America’s economy was shrinking in the first quarter of 2022, France’s economy was growing. A finance professor describes the current era in the U.S. as the “Biden stagflation,” combining high inflation with economic stagnation.
Biden’s policies caused inflation, according to economists like Bill Clinton’s Treasury Secretary, Larry Summers, and Obama treasury official Steven Rattner. As Rattner noted in the New York Times, Biden has spent “an unprecedented amount” of taxpayer money, which resulted in “too much money chasing too few goods.”
To deal with the high inflation of the Biden era, Senator Majority Leader Charles Schumer (D-NY) suggested a tax increase. But raising taxes on Americans would likely reduce economic growth and could deepen the coming recession.
The economy is being held back by Biden Administration policies that discourage work, reward idleness, and make it harder for companies to attract employees. Gas prices have more than doubled since Joe Biden took office. Biden made gas prices rise faster by curbing oil production, making oil more scarce. On taking office, Biden issued a slew of executive actions suspending oil and gas leases.
As the Heritage Foundation observes, Biden earlier took many steps to reduce the supply of oil and gas, which will keep energy prices high and harm industries that rely on inexpensive energy:
At first, Mr. Biden patted himself on the back for his plans to restrict oil and natural gas-based energy. Now that gasoline prices are really taking off, however, he denies that he has slowed domestic oil drilling.
But he has…..On Mr. Biden’s first day in office, he issued an executive order directing the Secretary of the Interior to put a …. moratorium on the Coastal Plain Oil and Gas Leasing Program. That program directs the Bureau of Land Management to lease certain lands in Alaska for oil and gas extraction.
A few days later, he issued another order “pausing” oil and gas leases on all public lands and waters.
According to the Bureau, Alaska’s Coastal Plain is “some of the most highly prospective land on Alaska’s North Slope.” It contains billions of barrels of oil and trillions of cubic feet of natural gas. It is a king’s ransom of energy wealth, and the law requires that the administration make it available for extraction….The result: Mr. Biden has unlawfully trapped much of America’s vast energy reserves behind a wall of bureaucratic red tape, leaving them unavailable now that the country needs them.
