No Impact on US Stock Market in Short Term Due to Politics in Washington

London, March 06 (QNA) – The Guardian newspaper touched upon what it described as the “bizarre disconnect between the surging US stock market and the sad state of American politics,” before the presidential elections on Nov. 5.

In article, the newspaper explain that this disconnect between the stock market and the crisis facing American democracy is because the market believes that the US president’s influence is limited over the domestic economy, at least in the short term. Furthermore, investors believe that AI will prevail, with AI companies accounting for a large share of the stock market’s recent gains.

However, the Guardian insisted that “this interpretation overlooks the long-term consequences of possible policy decisions such as retreating from free trade.

It also noted that Donald Trump’s restrictions on immigration would hinder high-skilled immigration, while Joe Biden’s open-border policy makes little sense.

Investors believe that the US electorate has become so deeply divided that no president is likely to control both houses of Congress for more than a couple of years, the newspaper said, adding that with political impasse becoming the norm in Washington, “the Big Tech firms accounting for a large share of the stock market’s recent gains, owing to an AI boom, are less likely to face anti-monopoly regulation.” Biden issued an executive order aimed at “managing the risks” posed by the rise of AI. However, due to the US administration’s lackluster efforts to rein in the industry, it is not clear how it will manage these risks.

The Guardian stressed that the current performance of the stock market is partly fueled by the expectation that AI will remain unregulated, despite the potential displacement of numerous workers, political instability, and the negative impact on public discourse.

“The AI industry could eventually amass enough political power to quash any attempt to regulate it, mirroring the strategies used by banks before the global financial crisis and social media platforms today. Essentially, the market is operating under the assumption that AI companies will thrive, regardless of the outcome of the US presidential election,” the newspaper said.

It pointed out that the development of financial regulation offers valuable insights into how to regulate AI without sacrificing innovation. After the 2008 financial crisis, regulators were able to implement stringent measures that hampered market efficiency but enabled banks to withstand the pandemic shock and subsequent inflationary pressures.

A Biden victory would be far more predictable, especially if the Democrats hold on to the Senate and take back control of the House of Representatives, the newspaper said, adding that this would probably result in significantly higher interest rates that constrain private demand, coupled with subtle pressures on the Fed to take greater risks with inflation.

The Guardian concluded its article by pointing out that “given the challenges and uncertainties facing both the US and global economies, it is difficult to see how the current stock market boom can last, no matter who wins in November.” (QNA)