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It's the Economy, Stupid!



Wednesday, November 4, 2020

It’s been a wild year, to say the least. In addition to dealing with the COVID-19 pandemic, the election has been a top headline for as long as many of us can remember. These two issues are inextricably connected, and both have economic implications. Our daily lives (and the news cycle) are filled with chaos, confusion, and endless uncertainty.

I started writing this post last week and had it in shape to publish by the end of the day on Monday, November 2. By the time you read it, Election Day will be over, but it’s entirely possible we won’t yet know the outcome of many races. That said, you can be certain the markets will have reacted to early results.

The Economy

The word “economy” is big. It’s often used as a term that’s synonymous with the stock market, even though the economy is more than the buying and selling of securities. The New York Times published an article called “Repeat After Me: The Markets Are Not the Economy,” and I think it’s worth reading.  It was published back in May, and so much has happened since then, but the main talking points of the article remain noteworthy. “The stock market looks increasingly divorced from economic reality.” Despite a few wild swings (which we might be able to chalk up to corrections), the stock market is strong, and perhaps investor confidence is too. But unemployment remains high, and small businesses are struggling to stay in business.

Financial Education

As an Investor Education Coordinator, I’m careful and intentional in how I discuss this. Vaguely or incorrectly using a term like “the economy” could make me appear to be oblivious to the struggles of the people I’m trying to reach. As the NYT article explains, while more than half of American households own shares or investment funds, the majority of stock portfolios are modest. “Stock ownership among the middle class is pretty minimal,” said Ed Wolff, an economist at New York University. “The fluctuations of the stock market don’t have much effect on the net worth of middle-class Americans.” And here’s why: the wealthiest top 10 percent of American households own about 84 percent of the value of all household stock ownership, according to the U.S. Federal Reserve.

The stock market is part of the economy, but it isn’t the whole economy. And this year, perhaps more than ever, the whole economy matters a whole lot. It was James Carville who famously said, “It’s the economy, stupid!” Carville was an elections strategist for then-Governor Bill Clinton, and he helped Clinton beat President George H.W. Bush in 1992 in the midst of a recession that left many Americans out of work and in debt. Today, many Americans are once again out of work and in debt. The economy (heavily influenced by the pandemic) is influencing the election, and concerns over the results of the election are further influencing the economy. It’s one of those vicious cycle things.

Here to Help

Regardless of who wins the election, many of us will continue to struggle with job security and debt, and COVID-19 will still be an issue of concern. For folks like me who aim to educate and improve financial lives, it’s important that we remain acutely aware of the concerns of those we serve, and that we deliver accurate information as well as compassion. Here at Indiana MoneyWise, we create a lot of our own content, but we also link you to outside resources that we have found to be incredibly useful. So whether you’re struggling with debt or unemployment, we can connect you to helpful information. And if you’re in good financial shape and looking to invest, we can help you avoid falling victim to fraud.

We provide free, statewide presentations on a wide variety of financial subjects. Currently, these presentations are all done via the web conferencing platform of your choice (we have experience with Zoom, Microsoft Teams, Google Meet, and WebEx). If you’d like to schedule a presentation, use the request form on our website.

Blog topics:  Budgeting, Credit, Fraud Prevention, Investing, Archive