Higher Gasoline Prices — the Last Thing the Biden Campaign Needs
Author: Greg Valliere
September 7, 2023
WITH THE LABOR MARKET still at full employment and GDP for this quarter looking good (the Atlanta Fed is predicting 5.6% economic growth this quarter), you would think that Biden has something to boast about. But poll after poll in recent weeks show dismal voter ratings of Biden’s handling of the economy in general and inflation in particular. And the inflation story has suddenly gotten worse for him.
THE PUBLIC IS FOCUSED ON THREE MAJOR ASPECTS OF INFLATION: Food prices, still stubbornly high; rents, which have surged this year; and now — once again — the price of energy. With global producers cutting back on output, gasoline prices may continue to rise.
AFTER A SPENDING BINGE THIS SUMMER, consumers now face an assault on their real disposable income. In addition to the three inflation sources listed above, student loan payments are about to resume, car prices could jump if the United Auto Workers go out on strike; the impact of aggressive Fed tightening will begin to affect interest rate-sensitive sectors; and a looming government shutdown could put a dent in consumer confidence.
WHITE HOUSE ADVISERS EXPRESS PUZZLEMENT over the public’s sour views on Bidenomics, but it’s no mystery: consumers see higher prices everywhere. The summer drop of inflation may give way to an autumn of higher gasoline prices. Biden’s polling numbers are terrible — In a new Wall Street Journal poll this week, 59 percent disapprove of Biden’s handling of the economy, and 63 percent disapprove of how the president has handled inflation.
THE SURGING BUDGET DEFICIT, PROJECTED TO HIT $2 TRILLION this year, also could become a big political negative for Biden. Economists are divided on whether huge deficits cause inflation, but voters overwhelmingly cite the red ink as a factor in keeping inflation high.
THE FEDERAL RESERVE FACES QUITE A BIND: The central bankers have been signaling that its rate hikes may be over, but they can’t possibly consider rate cuts until well into 2024. Like most presidents, Biden wants the Fed to help in his re-election campaign, but the Fed would be accused of partisanship if it started cutting rates aggressively next year after insisting that it wouldn’t rest until inflation got below 2% and stayed there.
BOTTOM LINE: If consumers refuse to acknowledge that the economy is in solid shape — and they focus instead on inflation — Biden will be in big trouble. The public overwhelmingly thinks he’s too old for a second term, and if he can’t get better scores on the economy, he could be no better than a 50-50 bet for re-election. Higher energy prices are the last thing he needs.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.