On October 28th, the S&P 500 Index fell 3.5 percent, the biggest drop since June, amid a surge in COVID-19 cases and hospitalizations, especially in the U.S. Midwest. There was also a significant drop in European stock values where there have been rising coronavirus infections and even tougher lockdowns. In addition, American lawmakers failed to agree on an economic aid package before the Nov. 3rd election thereby eliminating any stimulus in the very near future. The West Texas Intermediate crude sank 5.6 per cent to US$37.36 a barrel because of fears that additional economic restrictions will have a further negative impact on the already hard hit travel industry and daily commuting.
The timing of this significant downturn could not be at a worst time for Donald Trump, less than a week before the election. Trump has consistently used the stock markets as an indication of an economic recovery. The problem is that the markets do not necessarily reflect what’s actually happening on main street. For one thing, the U.S. Bureau of Labour Statistics showed that the unemployment rate declined to 7.9 percent in September 2020 from 8.4 percent in the previous month. However, this was below market expectations of 8.2 percent, as fewer people were looking for jobs. The labour force dropped by 0.7 million to 160.1 million, with the number of unemployed persons falling only by 1.0 million to 12.6 million and employment rising by just 0.3 million to 147.5 million. Moreover, the jobless rate remained well above pre-pandemic levels as the recovery from COVID-19 shock showed signs of slowing amid diminishing government stimulus and record spikes in new coronavirus cases.
The President’s campaign has put all his eggs in the one basket, that of the economy. He continues to downplay the terrible impact of COVID-19 on the economy. While Trump’s rich friends have benefited from the recent stock market gains, the average American continues to suffer from the loss of business and employment, not to mention the health care costs associated with the coronavirus. The bottom may be about to fall out of the President’s campaign. One can only predict that the U.S. has headed into a major recession, one which may be greater than that of the Great Recession and may last longer. Whoever becomes the next president will have to deal with this economic mess, which can only begin by reducing the COVID-19 case loads and providing an appropriate economic stimulus package.
FROLITICKS 