Surveying prospects for the stock market in the coming year, financial expert Ed Yardeni recently used a twist on the old FDR line about there being nothing to fear but fear itself.
Perhaps what investors should be fearing now, he said, is nothing to fear. Those words could apply as much to politics as finance.
The context for Yardeni’s remark was the exuberant late-year market rally, which pushed the S&P 500 up 23 percent, the Dow Jones Average up 14 percent and the Nasdaq an amazing 43 percent for the year. If you haven’t checked in on your 401(k) since early November, you might want to do that now.
It was, the Wall Street Journal commented, “a far cry from the doom and gloom many were bracing for at the start of 2023.” Yardeni’s worry is that there has been so much unexpected good news over the past year that investors are losing all sense of caution.
Polls last year showed no evidence that voters credited Joe Biden for holding off a widely predicted recession, turning inflation around, or the lowest unemployment rate since 1969. The administration’s early efforts to sell “Bidenomics” fell flat. But it would be a mistake for Republicans to assume they have nothing to fear from Biden’s economic record. Voters tend to make their decisions for a variety of reasons, and the emotional and impressionistic reasons will often outrun those that require cooler deliberations.
On the other hand, Democrats shouldn’t think they have nothing to fear from an economic downturn because it didn’t show up when all the Wall Street whizzes predicted it would. There’s almost a year left for it to show up. In fact that — and not the incumbent’s age — may be the biggest risk they face in this election year.
Circling back to the market, the possibility that the next president might return the country to a Smoot-Hawley-style trade policy and replace a huge number of federal employees with political appointees has not raised as much alarm as one might think. That’s because the things Trump says about the economy are only a small part of all Trump says, and the public pays only passing attention to anything he says. And so there is nothing to fear.
A stroll around Hartsfield-Jackson over the past week or so would have given you no indication that a “tripledemic” of flu, COVID and RSV is surging around the country. The percentage of travelers wearing masks was still quite small. The pandemic caused the politicization of a lot of things like masks, and the pandemic’s retreat has led to a nothing-to-fear vibe in public spaces. That’s going to make the next major health emergency — and there will be one — more difficult to control.
Nothing to fear under the Golden Dome, either, with billions in surplus revenues and an election coming up. Right?
In truth, there’s only a small measure of wisdom in Yardeni’s comment. We should definitely worry about complacency, whether we’re talking about inflation or infectious diseases. But even the most watchful will, in the long run, be overrun by the unexpected as politics and the market continue to teach us.
