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The recent market downturn might be more than a bump in the road for Vice President Kamala Harris and her newly launched presidential campaign.
Major indices began recovering on Tuesday after a selloff in stocks and other assets rattled global markets between Friday and Monday.
The S&P 500 and the Nasdaq Composite regained about 2% each on Tuesday, while the Dow Jones was up 1.5%.
While several experts and analysts dismissed the fact that the market slump is indicative of a recession, negative economic events can have unfavorable consequences for the incumbent Democratic Party in the 2024 election.
Republican nominee former President Donald Trump was quick to pin the blame of the market downturn on Harris and the Biden administration.
While every four-year presidential term normally experiences periods of market pessimism, the politicization of the event was an almost unavoidable consequence in the context of the upcoming election.
In 2018, during Trump's presidency, the stock market experienced its worst decline in 10 years, since the 2008 financial crash. The dip was many times worse than what the market experienced this week.
Regardless of whether current economic markets are indicative of a recession or not — which is a discussion that has kept economists engaged for at least three years — public perception of the economy's health is a key variable in the upcoming election.
The public's perception of the economy is not necessarily tied to hard economic data and can be widely influenced by news events. A recent survey found that most Americans were wrong about the current state of the economy.
While incumbency typically provides an advantage in elections, poor economic indicators can sway voters away from reelecting the current administration.
The recent market meltdown, as well as the worse-than-expected jobs data that contributed to the drop, will likely affect monetary policy, putting extra pressure on the Fed to reduce interest rates sooner rather than later. On Monday, interest rate futures had fully priced in a 50-basis-point rate cut in September.
The Tuesday selection of Tim Waltz as the Democratic vice presidential candidate sparked heated comments across the business community. The decision was praised by billionaire investor Mark Cuban as well as tech CEOs from LinkedIn's Reid Hoffman to Box Inc's (NYSE:BOX) Aaron Levie.
Harris’s economic plans aim to continue the administration’s strategy of incentivizing strategic industries where the U.S. can compete with China and other global economic powerhouses.
A 2023 economic plan published by the White House placed "making smart public investments in America" as a central item in the administration's economic strategy, which involves attracting private investment in specific industries by providing tax incentives and grants through policies like the Inflation Reduction Act (IRA); the CHIPS and Science Act; as well as the Infrastructure Investment and Jobs Act.
Green energy, electric vehicles and semiconductors stand to benefit from said plans, along with the construction and manufacturing sectors.
Major semiconductor companies have been some of the worst hit by the recent market meltdown, although many analysts described it as a natural correction to a sector that has experienced unprecedented growth in the wake of the recent artificial intelligence revolution.
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Image made from Shutterstock pictures.
