State of the Nation Address (SOLD) of the United States will take place tonight at 4 am Israel time. For the President of the United States – Joe Biden, another matter that will occupy him is the American stock market.
SOLD is an annual message delivered by the current President of the United States to a joint session of Congress near the beginning of each calendar year. In this speech, the president gives reports on the current state of the country to the nation. This speech usually includes reports on the country’s budget, its economy, news about the government, the government’s agenda, progress in various legislations, reports on achievements, as well as the president’s priorities and legislative proposals.
The speech will be delivered at 9:00 PM EST in Maryland, Washington. Biden, who will give another speech this year, comes to the meeting with quite a few things on his mind. The first thing the president will probably discuss is the state of the stock market in the last two years – which fell in 2020, climbed back in 2021, and fell very sharply for many investors in 2022.
When the corona crisis ended, the Dow Jones index rose by about 11% since the new president took office towards the end of January 2021. Many investors were then optimistic about the new corona vaccines at the time, and also thanks to seeing how the economy was showing any signs of growth. The monetary policy of the Federal Bank also encouraged those investors.
But you know what they say, luck is luck, and unfortunately for the American president, the coin turned during his second year in office, when the Dow Jones fell 4%. Inflation, which broke 40-year records, encouraged the Fed to raise interest rates without restraint (and probably for the better), until six days ago the central bank determined that the interest rate in the American economy will now be between 4.5-4.75%, and for the first time they reported a deflationary process.
Following these interest rate increases, the American economy entered a technical recession in the first half of 2022. The Russian-Ukrainian war – which began last February – did not help the markets and the American market in particular. The war greatly damaged the economy, affecting the exchange rates, various commodities such as wheat, and the most important commodity for the United States – oil.
We dealt a lot with the issue of the lack of oil following the Russian-Ukrainian fighting. First, when we reported on the suspension of activity of the “suspicious” Nord Stream pipeline that happened several times in the past year. The Nord Stream pipeline transports gas from Russia to Germany and thus to the rest of Europe and passes over the bottom of the Baltic Sea. First, Germany suspended the flow of gas through the pipeline as a sanction in light of the Russian invasion of Ukraine, and then, last August, Russia announced that it would close the pipeline for 3 days, but in practice it left it closed for a much longer period.
In the first two years of Biden’s presidency, the Dow Jones index rose by only 6%. For comparison, since the beginning of the 20th century, the index rose in 65% of the cases in which the president of the United States served in the first two years of his term, according to research sources from the index. On the other hand, the average increase percentage was about 14%.
And in the meantime, despite the same rise in the index in the first two years of Biden’s presidency, the performance of the market itself was the most dismal seen since 2001 and 2002, when George Bush was president. The Dow fell by about 19% during the year 2001, which included both the disaster of the twin towers and the adjustments the government was forced to make as a result of fear of the financial crisis.Dot-com.
The falls in the market were much worse when former President Herbert Hoover took office in March ’29, when the global economic crisis attacked the American market. The Dow Jones fell about 40% in his first two years in office. Franklin Roosevelt took the reins in 1933 and led the country’s economy to a most impressive correction, during which the index climbed 90% in his first two years in office – the best index performance in history according to the Dow Jones research bodies.
On the other hand, the performance of the index in the first two years of the president’s office does not tell a complete story. For example, in the last two years of the Bush administration between 2000 and 2004, the index climbed by about 20%, and as we know – most of the factors that affect the American market are outside the control of the president himself.
When Biden just took office, the United States was already facing an economic and geopolitical crisis. Inflation did decrease during that period, but it still crossed the 2% barrier imposed by the Fed. The Fed’s preferred index in terms of price increases then showed an increase of about 4.4% in inflation and the labor market began to show concerns about a certain vicious cycle in which salaries rise, and thus the workers demand higher wages – a major factor that affects inflation as the grants awarded by the governments have already shown in the past .
And in fact, even outside the United States, things did not look very positive. The war in Ukraine intensified the economic-political tensions that already existed between the United States and China. Last week, US Secretary of State Anthony Blinken announced that he was postponing his trip to China, after suspicions arose that Chinese espionage was inside the United States.
Let’s summarize everything in one sentence – a confrontation between the American Republicans and their Democratic opponents, especially on the American debt ceiling – will threaten the American economy.
Investors, on the other hand, opened the year with impressive gains in shares. Many economic experts were asked about the performance of the Snoopy index (S&P 500) in 2023, and almost all of them said that in their view, the index will climb close to 10% in the cross year. This is a significant improvement compared to the previous year, when the snoopy dropped close to 20%.
The same sources also believe that the economy will expand slightly in the coming year. At the same time, the Federal Bank expects an increase of about 0.5% in GDP in 2023. In 2022, the American GDP increased by about 2.1%, according to a preliminary look at the GDP growth data for the fourth quarter of 2022. Currently The Dow Jones started the year in a good way – the index rose by about 2.3% while the Hapoalim index jumped by 1.5% from January 20 until the market closed yesterday evening.
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