The U.S. stock market is experiencing a surge, but the state of American politics tells a different story. With the upcoming rematch between President Joe Biden and former President Donald Trump in the presidential election, there seems to be a disconnect between the two. Winston Churchill’s famous quote about Americans doing the right thing after trying everything else may need to be adjusted to reflect the current situation.
The stock market’s buoyancy may be attributed to the belief that the president’s influence on the domestic economy is limited in the short term. Additionally, the rise of artificial intelligence (AI) may be seen as a dominating force in the market. However, the long-term consequences of policy decisions, such as free trade, inflation, debt trajectory, and immigration, could have significant impacts.
The deep division within the U.S. electorate and the likelihood of political gridlock in Washington may also be contributing to the market’s optimism. With Big Tech firms driving gains in the market due to the AI boom, the fear of anti-monopoly regulation may be lessened.
However, the risks posed by AI are significant, and regulatory oversight is crucial to prevent disruptions in legal, ethical, economic, and political systems. The evolution of financial regulation post-2008 crisis offers insights into how to regulate AI without sacrificing innovation.
The current stock-market rally is fueled by the expectation that AI will remain unregulated, despite potential risks. A Trump victory could have negative consequences, including escalation in trade wars and military conflicts. On the other hand, a Biden victory may bring predictability but could lead to higher interest rates and inflation risks.
Overall, the future of the stock market remains uncertain, regardless of the election outcome. The challenges and uncertainties facing the U.S. and global economies suggest that the current boom may not last. The disconnect between the stock market and American politics raises questions about the sustainability of the market’s current trajectory.
