There are a couple of big unfolding stories that I want to comment on today. The big one is Monday’s big drop in the stock market.
On Monday, the Dow fell more than 1,000 points to close 2.6 percent lower. The NASDAQ was down 3.43 percent. The selloff had several roots, none of which can be traced back to President Biden or Kamala Harris except by six degrees of separation. (Sorry, Republicans.)
The decline actually began in Japan where, as the Wall Street Journal explains, American investors were engaged in the carry trade with the yen. The carry trade essentially profits from differences in interest rates by borrowing money at low rates in places like Japan and China and reinvesting the proceeds in countries with higher rates. The rising yen in recent weeks forced investors to close out these positions by selling their high-interest investments to pay off their borrowed yen deals.
On this side of the pond, the panic was fueled by a disappointing jobs report last Friday and the news that Warren Buffett’s Berkshire Hathaway was cutting loose more than half of its holdings in Apple. Buffett’s thinking is not totally apparent, but the move was likely affected by slow growth from Apple, a high valuation for the stock, and a saturated electronics market. Apple ended the day down 4.82 percent.
The July jobs report, which came out Friday, showed unemployment at a three-year high of 4.3 percent. The rising unemployment rate boosts fears of a hard landing from the Fed’s inflation battle.
The flip side is that the higher unemployment boosts the chances that the Fed will start lowering interest rates again soon. There has been a strong correlation between interest rate hikes and bad days for the stock market. There was a lot of hope that the Fed would lower rates in July, but the current news makes a rate drop a sure thing in coming months. That may goose the market in turn and avoid the widely expected hard landing.
The instability in the stock market also adds instability to the election. A recent CBS/YouGov poll showed that voters trust Trump over Harris on the economy by 45 to 25 percent, but interestingly, the same poll showed Harris edging out Trump in the topline number. The disparity on the economy is likely due to Joe Biden’s ineffectiveness at pressing home attacks on Trump’s proposed tax increases and a poor record on the economy in his first term that included massive debt (larger than Biden’s) and unnecessary trade wars that strangled American manufacturing and agriculture. Kamala Harris is already proving more effective at building trust on the economy.
A stock market crash generally is not considered to be a great thing for the incumbent - and Harris is a quasi-incumbent - but it’s also true that the market has not crashed. At least not yet. The largest single-day decline in history came in 1987 when the market fell almost 22 percent in one day. In terms of size, the loss depends on how you count. As a percentage drop, Monday doesn’t rank in the top 20 one-day declines, but it ranks as the twelfth largest points drop according to Wikipedia.
The big question is where the market goes from here. The WSJ predicts more unwinding of the yen carry trade in coming days, but market fundamentals are still strong. Plus, the Dow is still up 2.6 percent for the year, even after Monday.
Still, a market that is at least perceived as moving into bear territory might not be good for Kamala Harris, as Donald Trump gleefully pointed out on Truth Social. Trump called the decline the “Kamala crash” and warned of a “GREAT DEPRESSION OF 2024, NOT TO MENTION THE PROBABILITY OF WORLD WAR III” if Harris is elected [emphasis his].
In unstable times, the stock market can be erratic. If anyone should know this, it’s Donald Trump because the stock market was a wild ride during his tenure. A lot of the blame for the erratic stock market during the Trump years can be tied to Donald Trump’s erratic trade policies as Kevin Simmons pointed out in the Dallas Morning News in 2019. Last week, several Yale faculty members penned a joint article that opined that Trump’s economic talk on the campaign trail was already rattling markets, especially as he led Joe Biden in the polls.
Nevertheless, I don’t blame Trump for Monday’s decline either. Even though political sites try to tie every bad event to the competition and every good event to their champion, the truth is that a lot of world events have nothing (or little) to do with American politics.
Natural disasters occur, accidents happen, and stock markets and economies go up and down. This doesn’t mean that there is always someone to blame. For decades now, we’ve known that the business cycle is a predictable trend. The economy can’t always grow, no matter who is president, and like forest fires enable ecosystems to become more vibrant, recessions can be necessary to prune economies of inefficient and weak businesses. In the current economy, a recession may be a necessary by-product of the fight against inflation as Ronald Reagan and Paul Volcker experienced in the early 1980s.
But even though politicians aren’t always at fault, they definitely get the blame. If the economy slows as we move toward Election Day, the question will be whether voters fear a recession more than they dislike Donald Trump.
Moving along, rallies are sometimes used to refer to booming stock markets, but this week the rallies in the news are competing Harris and Trump rallies in the same arena in Atlanta. The interesting thing about the Trump rally was that The Former Guy was snubbed by Gov. Brian Kemp. As he is wont to do, Trump took this personally and spent much of the speech attacking Kemp and Secretary of State Brad Raffensperger.
With Georgia back in play, this was not a smart thing to do. Kemp is a very popular governor who handily beat a Trump-anointed challenger for re-election. Trump is going to need partisan unity to fight off Harris in Georgia, and he isn’t going to win over skeptical Republicans and moderates by attacking Brian Kemp. I doubt he’ll win over Kemp either, who didn’t vote Trump in this year’s primary but has said he is “supporting the ticket.”
The brouhaha, along with a Stalinesque Trump post calling for a “purge” of Republicans who are insufficiently loyal is another example of how Donald Trump cannot accept anything less than unwavering loyalty with grace. The former president seems determined to make the Republican Party smaller, which is a curious strategy for someone who wants to win an election.
BOXING DAY: And finally, I’d like to say a few words about Imane Khelif, the Algerian boxer who some are saying is a man.
The truth is that Khelif was born a woman. She has female sexual organs and a birth certificate and passport that state that her gender is female. She has never transitioned and reassigning gender is not legal in Algeria.
USA Today reports that Khelif has DSD (differences in sexual development), but she is not transgender. Khelif was disqualified from a different boxing association because tests revealed that she carries the XY chromosome, but there are instances of natural-born women carrying the XY chromosome typically found in males. One example of such an abnormality is Swyer Syndrome. The association that banned Khelif is notorious for lack of transparency and has itself been banned from the Olympics.
The point here is that Khelif carries the XY chromosome for natural reasons, not because of a medical choice that she made. It’s a birth defect.
It’s also untrue that Khelif is pummeling the competition. The AP points out that her record shows she is a mediocre boxer (by international competitive standards). Far from being a man who changes gender to become a champion at the expense of girls, Khelif has competed internationally before and lost. And she has always competed as a woman.
For years now, I’ve been told that you can’t change your gender. You are what you are born as. I agree with that.
Only now, it’s the culture-war right that is changing its tune. People refuse to accept that Khelif is a natural female. They say that they can tell that she’s really a man because she looks male, her medical records be damned.
Imane Khelif is not transgender and apparently is not even gay. She’s a natural-born woman with a birth defect. I think the people who are lying about her and mocking her are the ones who are gross and disgusting. That’s especially true of those who claim to practice the love of Christ.
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