Midterms in times of inflation: vote on the economic situation

Economic concerns are having a particularly strong impact on the US midterm elections this year. The fact that the stock markets are so weak means a loss of assets for many people.

In late July, US gasoline prices hit a record $5 a gallon in some states, while Biden approval ratings plummeted to a meager 38 percent. Although the average price of gasoline is currently $3.80, Biden’s approval rating has recently remained at 40 percent.

Many US citizens blame the president for high inflation. That was one of the most important economic and election campaign issues in the country, says the chief economist for Europe at ING Bank, Carsten Brzeski tagesschau.de: “I think Biden made a big mistake when he came to the White House. At the beginning of 2021 he continued the stimulus packages that were started under Trump. And in doing so he contributed to this overheating of the economy.”

Biden’s tenure marked by external shocks

Brzeski also emphasizes that the first two years of Biden’s presidency were strongly influenced by so-called external shocks: on the one hand the aftermath of the corona pandemic with its torn supply chains, on the other hand the war in Ukraine with a reorganization of global trade relations.

For Markus Jäger, a fellow of the German Society for Foreign Policy and associate professor at Columbia University in New York, Joe Biden is one of the presidents who would have had the most impact in the past 20 to 30 years. The economic importance of his various legislative projects is very great, for example in “green” technologies or in semiconductor production. The expert believes that the effects will be seen over the coming decade.

According to Jäger, if the Democrats lose their majority in Congress – with a president who is practically incapable of political action – this would also have a major impact on companies in the USA: “They are usually fine when there is a unified government, i.e. Congress and the Whites House in one hand. Because then an expansive fiscal policy is often pursued. If they block each other, then there is no expansive fiscal policy and there is less growth.”

Shares as part of retirement provision

What the midterm elections trigger on the stock market affects the average US citizen much more than German voters do, for example, the local stock market. In the United States, it’s more common to buy stocks and even invest some of your retirement savings in the financial markets.

US voters are all the more likely to vote today on their personal economic situation. “Due to the sharp rise in interest rates by the US Federal Reserve and because of the uncertainty caused by high inflation, this year will be one of the worst stock market years in the USA for a long time,” says ING chief economist Brzeski. And people felt this loss of wealth directly.