Stocks fell sharply on Friday, at the end of a brutal week for the stock market. The stock market is now worth less than when Biden took office. Indeed, after adjusting for inflation, it is down by at least 17% since Biden was inaugurated.
On September 23, the Dow Jones Industrial Average fell 486 points, or 1.62%, to 29,590. The S&P 500 dived 1.72% to 3,693, while the Nasdaq Composite dropped even more – by 1.8% to 10,868. CNBC reports that the “Dow notched a new low for the year and closed below 30,000 for the first time since June 17. The 30-stock index fell 19.9% on an intraday basis and flirted with bear market territory, at one point plummeting more than 826 points. All the major averages capped their fifth negative week in the last six, with the Dow giving up 4%. The S&P and Nasdaq shed 4.65% and 5.07%, respectively. It marked the fourth negative session in a row for the major averages.”
The most meaningful of the three major averages is the S&P 500 Index, because it includes the broadest cross-section of our economy. When Biden took office, the S&P was at 3852. Now, it’s at 3,693 — seemingly down over 4.3%. But it’s actually down a lot more than that, because there has been 13.2% in inflation since he took office — that’s the amount of inflation America had experienced under his presidency as of early September 2022, when the Consumer Price Index had risen to 296.171 from 261.52 at the start of Biden’s presidency.
When you account for both the drop in the S&P’s value from 3852 to 3693, and the further reduction in the S&P’s value due to inflation, the S&P’s real value is down by 17%.
The Dow Jones and NASDAQ are also down since Biden’s inauguration, and even more so after adjusting for inflation. The Dow has fallen from 30,931 to to 29,590 — over 4.3%. After adjusting for inflation, it’s down 17%.
The index with the largest number of companies — the NASDAQ index, which includes 3700 companies — has fallen from 13,197 to 10,868. The NASDAQ has thus fallen by about 18% even before adjusting for inflation — and a whopping 29% after adjusting for inflation.
It’s not just stocks that are losing value. So are bonds. High inflation is making them worth less. Interest rates on municipal bonds are often under 3%, much lower than the current inflation rate of over 8 percent.
Since people’s retirement accounts usually contain stocks, bonds, or stock mutual funds, dropping stock and bond values have left many Americans’ 401(k)s and retirement accounts smaller in real terms than when Biden took office.
While prices are going up, people’s savings are shrinking. Most people’s savings accounts are earning interest rates of less than 1%, which fails to keep pace with an inflation rate of over 8%. Effectively, people’s savings accounts are losing over 7% of their value each year.
These stock market declines reflect economic weaknesses: the U.S. economy shrank at a rate of 0.9% in the second quarter of 2022. It shrank at a rate of 1.4% in the first quarter of 2022, reflecting a huge rise in America’s trade deficit. 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.
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 recently, France’s economy was growing in 2022, and France’s inflation rate is lower than America’s. A finance professor describes the current era in the U.S. as “The Biden stagflation,” combining high inflation with economic stagnation.
Inflation is higher in the U.S. than in countries like Japan, where the inflation rate is only 3%. In Switzerland, the inflation rate is only 3.5%.
Biden’s policies caused inflation, according to economists like Bill Clinton’s Treasury Secretary, Larry Summers, and Obama advisor 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.
America’s economic productivity may decline further. The economy is being held back by Biden Administration policies that discourage work, reward idleness, and make it harder for companies to attract employees. Biden enacted policies that reduced the size of America’s private-sector workforce and made America less economically competitive.
