Economic Shifts and Presidential Policies: Analyzing the Impact on US Growth

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In the dynamic arena of the US economy, presidential administrations play a pivotal, though often limited, role in shaping economic conditions. Former President Donald Trump’s tenure was marked by low inflation, interest rates, and gasoline prices, alongside a buoyant stock market. As the 2024 election nears, the economic policies of potential candidates are under intense scrutiny. Voters currently express greater confidence in Trump’s economic management compared to his Democratic rival, Vice President Kamala Harris.

Goldman Sachs (NYSE: GS) has projected divergent economic outcomes based on the candidates’ proposed policies. Should Trump return to his previous policies, including new tariffs and a business tax cut, the US economy might contract by half a percentage point in his first year. Conversely, Harris’s economic strategy is expected to provide a modest boost to GDP growth.

These forecasts highlight the considerable, albeit moderated, influence of presidential policies amid broader market forces and global economic trends. Goldman Sachs’ analysis reflects the long-term economic trajectory shaped by the aftermath of the Great Recession of 2008 and subsequent recovery. Presently, the economic landscape faces heightened inflationary pressures and increased protectionism, challenges that are likely to persist regardless of the election outcome.

The impact of presidential policies is constrained by dominant market forces. For instance, interest rates have experienced dramatic shifts: the Federal Reserve slashed short-term rates to zero following the Great Recession to stimulate the economy, then gradually increased them between 2015 and 2019. The onset of COVID-19 led to another significant rate cut. Current average mortgage rates, though higher than in the past decade, remain below long-term norms, with potential for gradual decreases influenced by future Fed decisions.

Gasoline prices, too, have varied significantly between the Trump and Biden administrations. Under Trump, lower average gas prices benefited from peak fracking production and global overproduction. However, the industry’s focus has shifted towards profitability and capital discipline, moving away from aggressive production despite presidential influence. The economic growth rates during Trump’s presidency, prior to the pandemic, were slightly higher than during Obama’s second term but showed a decline when accounting for COVID-19 impacts.

The Biden administration has overseen stronger growth rates, yet these gains are tempered by higher inflation and interest rates, factors shaping voter sentiment. As the US approaches another presidential election, the candidates’ economic policies will be a key consideration for voters. Nevertheless, it is evident that while presidents can steer economic policy, broader market forces and enduring trends largely drive economic conditions. This interplay between presidential influence and market dynamics will continue to shape the economic landscape.

**DISCLAIMER: THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS INVESTMENT ADVICE. INVESTING INVOLVES RISK, INCLUDING THE POTENTIAL LOSS OF PRINCIPAL. READERS ARE ENCOURAGED TO CONDUCT THEIR OWN RESEARCH AND CONSULT WITH A QUALIFIED FINANCIAL ADVISOR BEFORE MAKING ANY INVESTMENT DECISIONS.**