It took little time for this week’s wild stock market gyrations to turn political.
With share prices tumbling Monday, former President Donald Trump seized on the free fall to bludgeon Vice President Kamala Harris, his rival for the White House, by calling the market woes a “Kamala Crash.”
“Stock markets are crashing, jobs numbers are terrible, we are heading to World War III, and we have two of the most incompetent ‘leaders’ in history,” Trump, the Republican presidential nominee, posted to Truth Social at 8:12 a.m. “This is not good.”
But then the market jumped Tuesday, regaining some of the ground it had lost.
Financial analysts, political partisans and academics told TribLive that the state of the economy come Election Day could help or hurt an incumbent candidate, whether president or vice president.
Fair or not, they said, Harris, the Democrats’ nominee for the White House, could take the blame in November if the stock market tanks or if voters are feeling the pinch of inflation.
“If the market rebounds and it’s in solid shape this fall, and interest rates are cut and it seems the economy’s on a pretty solid footing, [Harris] will get some benefits,” said Chris Borick, a political science professor at Muhlenburg College in Allentown. “If not, she’ll likely pay the price.”
It doesn’t matter that Harris, as vice president, has little impact on the economy, Borick said.
“American politics works on a dynamic where, historically, the economic conditions are attributed to the administration, and therefore it really doesn’t matter how much impact they have,” he said. “It’s how much impact the voters perceive.”
Monday’s dismal performance on Wall Street was the product of several factors.
A disappointing July jobs report, a plunge in Japanese markets and investor concern that the Federal Reserve has waited too long to slash interest rates all appeared to contribute to the market plummet.
That kind of financial picture could hurt Harris, said Stacy Rosenberg, an associate teaching professor at Carnegie Mellon University who leads courses in politics and public policy.
“If you’re the administration who’s the incumbent, you want the market to be up around election time,” Rosenberg said. “If you’re the opposing party, you want the market to be down.”
The Republicans, she said, can use stock market troubles and broader economic challenges — like inflation and interest rates — to attack Harris and the Democratic Party, even if they’re not wholly responsible for those problems.
‘It’s about pocketbooks’
Monday dawned with Wall Street experiencing its worst session in two years.
The S&P 500 plunged 3%, feeding off a rout in Asian markets. The Dow Jones Industrial Average plunged 1,033 points, or 2.6%. The Nasdaq Composite dropped 3.4%.
But come Tuesday, stocks rallied. The Dow closed at 38,997.66, down about 451 points from its midday high but still more than 261 points above where the market closed a day earlier.
While the whiplash might concern many investors, plenty of other voters have focused on more immediate issues, such as inflation.
“I think the election, at the end of the day, will be decided by kitchen-table issues, and inflation is a key one,” said Sam DeMarco, chairman of the Republican Committee of Allegheny County.
Mortgage rates, fluctuations in the price of groceries and gasoline, even questions over how building supply costs impact local development will be central to whether Pennsylvanians support Harris or Trump this fall, DeMarco said.
Pennsylvania remains one of the nation’s key swing states, with both parties investing heavily in efforts to claim the prize: 19 Electoral College votes. In a tight race, how voters are feeling about the economy could be key as the head to the ballot box in November.
Trump won Pennsylvania by about 40,000 votes in 2016. In 2020, President Joe Biden turned it blue by beating Trump by about 80,000 votes.
“I don’t think it’s any surprise that folks are talking about inflation — it’s on people’s minds,” said Sam Hans-Greco, who chairs the Democratic Party committee in Allegheny County.
“From our standpoint, it’s important, it’s about pocketbooks,” Hans-Greco said. “But we’ve had tremendous job growth, we’ve had tremendous wage increases. … Inflation is not the entire picture of the economic portrait.”
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Inflation’s impact
Fears of a potential recession might have caused investors to overreact Monday, triggering the stock market meltdown, said Dan Mallison, associate professor of public policy and administration at Penn State Harrisburg.
Overall, according to Mallison, the U.S. economy “is incredibly strong.”
“Yet people are still feeling inflation. … Prices aren’t going down,” Mallison said. “[People] will definitely blame those who are in power if they’re feeling it in their pocket. That’s been a big challenge for Biden, and the Republicans are going to try to tie that to Harris as well.”
Michelle McFall, Democratic Party chairwoman for Westmoreland County, struck an optimistic tone on Tuesday.
“[Monday] was a rough day,” McFall said. “Looks like it’s already bouncing back.”
DeMarco, the Allegheny County Republican chairman, said economic policies, even on the national level, have a deep in the Pittsburgh area. He pointed to a spike in costs for homeowners.
Banks promoted fixed 30-year mortgage rates ranging from 5.74% to 7.6% for homebuyers on Realtor.com on Tuesday. During the second half of Trump’s tenure, in the midst of the pandemic, fixed rates dropped to a 2021 average of 2.96%, analysts said.
That hike makes mortgage payments more expensive.
“These are the things that are causing our families to suffer and live paycheck to paycheck,” DeMarco said.
Economy is key
One market expert said staying calm and focusing on long-term goals in light of stock market fluctuations is crucial.
Michael Godwin is chief investment officer for Fragasso Advisors, the Sewickley-based firm that manages $2 billion in assets for more than 2,200 clients.
“Investors who have a long-time horizon should see the events of the past several weeks as minor blips and should not make many changes to their portfolio structure,” Godwin advised.
James Lange, a financial planner, certified public accountant and attorney with offices in Squirrel Hill, agrees that perspective is key. He also cautioned Pittsburghers against casting figures like Trump or President Joe Biden as central to the flow of the American economy.
“The classic advice from Warren Buffet, and I agree with it, is you should not mix up your politics and your investing,” Lange said.
One Duquesne University professor, however, said voting in presidential races often does get entangled in family’s finances.
“The economy is always a hugely important issue for voters,” said Kristen Coopie, Duquesne University’s director of pre-law, who has taught politics at the private Catholic research university.
“Oftentimes we will see people vote based on their pocketbooks, what their economic situation is, how they’re doing at that time,” Coopie said. “They want to see a ticket that has a plan.”
No matter how the stock market’s week ends, the economy is likely to play a major role in the upcoming election, said Berwood Yost, who oversees polling at Franklin & Marshall College in Lancaster.
“It’s what many people are concerned about,” Yost said. “The economy is one of the key issues that’s going to decide this campaign.”