Economic Inequality Could Break Trump As His Election Campaign Spends $800 Million Without Much Effect

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Sep 08 2020
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The stock market’s performance would certainly determine who wins the White House, but only to a certain extent and under certain circumstances. For example, S&P 500 index has been a great tool when it accurately predicts the winner of the U.S. presidential election – with an accuracy of 87% – since 1928. And since 1984, this method is 100% accurate.


Here’s how it works:   


Now, do you understand why Trump has been tweeting and throwing everything, including the kitchen sink, to make sure a   

USA - Economic and Income Inequality - Cartoon

For a start, this year is a global pandemic year where the Covid-19 is still on its rampage. The United States still tops the chart with 6.5-million cases and close to 200,000 deaths. The last time a pandemic as deadly as the Coronavirus struck the world was the Spanish Flu in 1918 –  Therefore, the S&P 500 indicator did not cater for such crisis.


Still, the S&P 500 ended the month of August with a 7% gain, its best August since 1986. However, the massive sell-off last Thursday that saw the Dow Jones Industrial Average dropped 807.77 points shows how volatile the stock market can be. The market also had not seen the Federal Reserve as aggressive as now in printing money and pumping the financial markets.


The problem with relying on the stock market to predict the next POTUS is the fact that only the rich or those with disposable cash play the market. Nearly 30 million Americans are receiving unemployment benefits, not to mention the jobless rate stands at 8.4%. The point is, while the wealthiest Americans are benefiting from the stock market, the poor Americans don’t.

Coronavirus - President Donald Trump - Mitigation Chart

The poorest Americans, despite the bullish stock market, continue struggle to pay bills and put food on the table. According to an August survey conducted by Reuters/Ipsos, nearly 3 in 5 people say the economy is on the wrong track. And for the first time this year, Donald Trump’s net approval on economic issues dipped into “negative territory.”


More importantly, while Americans saved a stunning US$3.2 trillion in July alone, the U.S. Census Bureau also revealed that more than 1 in 7 American households with children said in the same month that they sometimes or often didn’t have enough food. The job recovery has benefited the high-salary employees. The employment rate is still down 15.4% for low-wage workers.


It means the so-called “V-shaped recovery” trumpeted by Trump was only for a selected group of lucky Americans. Economists say the larger picture isn’t as rosy as the booming stock market. Not only about 1-million retrenched workers are forced to seek unemployment benefits each week, permanent job losses are rising and millions have seen either pays cut or job-hour cuts.

Dow Hits 20,000 - Traders Laughing and Congrats Each Other

In a nutshell, the gains in the stock market only help the wealthiest 10%-20% Americans while the 80%-90% poorest Americans simply have very little money to invest. To make matters worse, more than 1 in 5 small business owners reported that sales are still 50% or less than before the pandemic, according to a survey from the NFIB (National Federation of Independent Business).


Make no mistake. The economic inequality in the U.S. actually started decades ago. Over the past 50 years, the highest-earning 20% of U.S. households have steadily brought in a larger share of the country’s total income. In fact, according to the OECD (Organization for Economic Cooperation and Development), income inequality in the U.S. is the highest of all the G7 nations.


According to Pew Research Center, the wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016. The analysis also discovered that middle-class incomes have grown at a slower rate than upper-tier incomes over the past 50 years. The economic inequality has worsened under Donald Trump largely thanks to his policy of pro-capitalism.

USA - Poor American Sleeps On Bench

Obviously, Trump’s dependency on working-class or blue-collar voters could hurt his re-election bid the most during the current unpredictable time. That probably explains why his campaign is left scratching head after spending US$800 million of the US$1.1 billion in the 2020 Presidential Election. Despite spending the huge amount of money on advertising and whatnot, Trump is still behind Joe Biden by 10 points.


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