The State of America – Soft Landing, Hard Politicking

For those of you who would prefer to listen:

Many of you know that I wrote my thesis at Cal on Mark Twain and the Western Frontier. It was out west where Samuel Clemens experienced the expansion of the then 9-decade-old nation. Clemens was born on the banks of the Mississippi. He grew up and grew wise in his adventures out west. His childhood dream was to be a riverboat pilot. He fled Mississippi as the nation was being torn apart by the Civil War.

Clemens traveled the country by stagecoach. It was an experience of a lifetime. He witnessed the cloud of dust, which was the Pony Express, with his own eyes. It was a fantastic site to see. The Gold and Silver rushes in California and Nevada brought herds of people to the west coast. Populations spiked. Resources were raw. There wasn’t much of a law. Sam Clemens was fascinated with the pioneer culture and had an abundance of raw material to opine on. He failed as a miner. He decided to write.

The name Mark Twain, which was a riverboat term indicating “safe water,” was born in a newspaper article in Virginia City, Nevada, in 1863. The name Twain exploded with popularity after publishing a book about a jumping frog in 1865. It was written in San Francisco. Sam Clemens was Mark Twain. Ultimately, Clemens became America’s most famous author, its favorite humorist and perhaps most effectively, its greatest critic. Like few others, Sam Clemens called it like it was. He had an opinion on pretty much everything. He also didn’t like to work.

Mark Twain witnessed and experienced America’s hyper growth and evolutionary change, from westward expansion to industrialization. He saw the end of slavery‚ the advancement of the railroads, the telegraph‚ the telephone, the formation of big government and the entry into foreign wars. Regarding all of it, he had something to say. Perhaps most, Twain loved to make fun of politicians. He did it for sport, both at the national level as well as local. One of my favorite Twain quotes, among so many, is this: “Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”

I can only imagine how Sam Clemens would have covered the ongoings in America today…

2024 is an election year. Of course you know that. Pretty much everyone on Planet Earth knows it. This week in America brought Super Tuesday. This has been a date circled on the calendar for months. It’s the end of the beginning, or the beginning of the end, depending on your preferred candidate. The election just got kicked into high gear. The match-up that nearly 80% of Americans say they don’t want became almost official. Donald Trump and Joe Biden now have unbeatable leads in their respective parties. Unless something unforeseen happens, they’re the 2 candidates left standing.

In the primaries, Americans don’t actually vote for Presidents. Delegates do. A ticked box for a candidate on a primary ballot is a vote for a delegate who supports that candidate and will vote for them at the party convention. That happens this Summer. The 2024 election will be like no other. Our nation is divided like few other times in history. Traditional norms have been broken. Since Covid, who even knows what normal is anymore…

Both Presidential candidates are essentially incumbents. Presidents #45 and #46 are known entities. They both have a body of work to measure. Both candidates have experienced backlash within their own parties. There’s also this: Both their parties have been accused of denying the legitimacy of the other’s Presidencies.

On Super Tuesday, former President Trump won every state but Vermont. He won by a lot. But Nikki Haley’s showing in North Carolina signaled that anti-Trump sentiment is alive and an issue. It’s especially the case among independents and college-educated Republicans. North Carolina had some takeaways that should concern the Trump campaign. The Former President narrowly carried Republican primary voters with college degrees. It was 51% to 45%. Further, roughly 1 in 4 North Carolina Republicans said they would feel dissatisfied if Trump won the nomination. That’s an issue that seems to be present across the country.

President Biden has internal issues too. His age tends to top the list of voter concerns. The trend of Democratic voters choosing “uncommitted” in protest of US policy in Gaza continued on Super Tuesday. Uncommitted earned 19% of the votes in Minnesota, up from 13% in Michigan last week and potentially threatening the Midwestern “blue wall” that was critical to his victory over Trump in 2020. There’s a lot of work to be done by both campaigns.

The State of the Union speech gave President Biden a wide platform to detail his economic priorities and provide a stark contrast to Donald Trump. Biden clearly went after it. It was basically a campaign speech. The initial response was very favorable from the left. Not so much from the right. There’s nothing shocking about that. Everything, and I mean everything, is political these days. Not much is expected out of Congress before the election. We are reminded of the phrase: “The President proposes, Congress disposes.” That’s certainly been the way.

Our Washington sources point out that State of the Union speeches tend to have short shelf-lives. Traditional norms have been broken. Everything is a contested partisan fight in Washington. The State of the Union speech was a critical opportunity for Biden to prove that he’s still up for the job as so many Americans are concerned about his age. By 2028, both Biden and Trump would be the oldest President in our nation’s history. It’s expected to be a nasty fight.

This from one of our Washington sources:
“The most impactful domestic policy proposals in President Biden’s SOTU have the lowest chance of being enacted this year. In his speech, he reiterated past calls to increase the corporate income tax rate and create a wealth tax on billionaires. The administration was unable to pass either proposal when Democrats have control of the House and Senate. To state the obvious, there is no way these proposals can pass a divided Congress – especially in an election year. For now, President Biden’s energetic delivery is likely to calm fears among some Democrats about his ability to campaign and serve a second term. The age question will not, however, be answered by one speech and the Biden campaign will be challenged to maintain the image of “energetic” over the long haul.” 

Fed Chair Powell was on Capitol Hill this week for his semi-annual Congressional testimony. He reiterated that there was no evidence the Economy was falling into a recession. Chair Powell said the Fed will be patient until it is more confident inflation is moving sustainably towards 2%. He did indicate the level of confidence keeps growing though. That suggests a rate cut might not be far off. It paused its rate hikes in June of last year. While the Fed’s restrictive monetary policy has put pressure on economic activity and inflation, the risk of cutting interest rates too soon could cause damage and is a risk it is unwilling to take. A Summer cut remains the most likely.

America’s resilient Economy keeps chugging along. It grew 3.2% in the final quarter of 2023, and strong consumer spending has the current quarter tracking around 2.5% growth. Jobs have been a driver of said strength. 275K jobs were created in February. That was much larger than expected. Unemployment ticked up to 3.9% from 3.7%, but still remains near 5-decade lows. Wage growth has tempered, a good sign for cooler inflation. It’s important to remember that 22 states raised their minimum wage last year. That was massively inflationary. It takes time for the Economy to absorb that type of increase. Wages are finally rising faster than prices. 

Both January and December payrolls were revised downward. Yields fell on the news. Stocks initially rose, reaching fresh, all-time highs, before reversing lower heading into the weekend. The Market thinks the final nail is in the coffin for Fed rate hikes. The US Economy does seem to be landing softly from the torrid pace of growth in 2023. The Economy is always a major election issue. Low unemployment generally benefits the incumbent. But polls suggest that not everyone feels good.

Investor sentiment measured 51.7% Bulls this week. That’s the highest on the year. The Stock Market hitting all-time highs will do that. Consumer sentiment, measured by the University of Michigan, sits at 77. It fell from the 79 peak in January, but remains decisively more upbeat than the 66 from a year ago. President Biden’s favorable rating came in at 40.1% on the Real Clear Politics national average. That’s actually up from January. Former President Trump’s is better, but not by much, at 42.5%. It’s no surprise that 3 out of 4 Americans don’t want this rematch. Can you guess what’s even less popular than the Presidential candidates? You guessed it: Congress has an approval rating of just 20%.

The Stock Market hit an all-time high Friday morning. It didn’t hold. The reversal lower resulted in a weekly decline for the S&P, something that had only happened 3 times in the last 19 weeks. The Biden camp doesn’t seem to get much credit for the rally. The White House has been claiming victory for its economic policies, which have led to low unemployment and strong consumer spending. On the flip side, the Trump team asserts the Market has been rallying in anticipation of the 45th President’s return to the White House. Of course, this is all grandstanding politicking, which will only expand in size and scope over the course of the next 8 months. One thing is clear, the Market does not seem to be too concerned about this contentious election ahead. At least not yet. 

The Economy just might be in its final descent for a soft-landing. That’s something few gave the Fed a chance to achieve. So far, so good, although we ain’t there quite yet. But the politics are what’s beating us up. It’s the loudest, angriest voice that gets the most attention. That can’t be good. Unfortunately, that’s how things are going. There’s going to be a whole lot of hard politicking from now to November. It’s going to be a bumpy ride.

Back to Twain:
There’s a lot of good going on. There’s also much that’s not. We can only surmise what Sam Clemens would say about the state of today’s America and this Presidential election. Compromise is considered a 4-letter word in Washington. Fake news and conspiracy theories are metastasizing online. Nobody knows who to trust. Everything is extreme. People are lost in the middle. The vast majority of Americans merely want a fair opportunity for success and a healthy living for their family. It’s that great American dream. It’s been the case from the beginning. Information needs to be trustworthy. Mark Twain eloquently said, “Knowledge becomes wisdom only after it’s been put to good use.” We, the people, are thirsty for leaders to do good. But since there’s so much noise and loud talking with very little listening, it’s nearly impossible to find compromise and bridge the divide. Mark Twain knew what happened when people don’t listen. It led to trouble. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Happy International Women’s Day. 

Thanks for reading.

Have a nice weekend. We’ll be back, dark and early on Monday.

Mike

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