Will 81-year-old Abe run for re-election? The US may not see a 15% rise in 1968.
President Biden faces numerous obstacles on his path to reelection, with growing calls from within his own party for him to step down in 2024. This situation is reminiscent of 1968, when President Lyndon Johnson stepped down in the midst of a resurgent Democratic Party. However, financial analysts point out that the market environment today is significantly different from half a century ago, and it is unlikely that the market will repeat its glory days. Biden stepping down 15 times has become a hot topic in the market, prompting deep thinking on the political landscape and economic outlook in the United States.
Can history repeat itself? Market expectations are key
After President Johnson announced his resignation in 1968, the S&P 500 index rose 15.1% for the year. However, financial analyst Mark Hulbert argues that this scenario is unlikely to repeat itself in today's market. He points out that efficient market theory suggests that widely anticipated events are already reflected in stock prices. Unlike Johnson's sudden resignation in 1968, the possibility of Biden stepping down has been openly discussed, and the market has been preparing for it. Moreover, Johnson's resignation in 1968 was also announced along with the cessation of bombing in Vietnam, which was a significant peace signal that helped to push the stock market higher. By contrast, Biden's stepping down does not bring about similar positive effects.
Market sentiment divergence may become a barrier to further stock market rise
Another key factor in the 1968 rally was the extremely bearish market sentiment at the time. According to the "Sentiment Index", only 10.3% of market participants were bullish that year, which paradoxically became a catalyst for the stock market rebound. However, the current market situation is quite different. The stock market is already at a historical high, and investors' sentiment is generally optimistic. This buoyant market sentiment may become a barrier to further stock market rise. Biden stepping down 15 times has become a hot topic in the market, but its impact may have already been digested. Therefore, even if Biden really announces his resignation, the market reaction may be relatively calm.