For Investors, Public Political Brainstorming Is Noise, Not News

Editors’ Note: MarketMinder is politically agnostic, preferring no party nor any politician. We assess developments for their potential economic and market implications only.

It takes a lot to make us feel bad for any politician, but we have half an ounce of sympathy for the poor White House staffers suggesting economic policy proposals. They keep floating trial balloons, and they keep getting panned. The good news for them: They are hardly the first to go through this. Whether it is 50-year mortgages, $2,000 tariff “dividends,” private investment accounts for Social Security or funding stimulus checks with an energy windfall profits tax, the annals of presidential policy proposals are full of flops. Remember this, because the economic politicking will probably only get louder as midterms near. We suggest not getting excessively excited or fearful about any of it. For stocks, it is all noise.

Regardless of party, a politician has one main job: winning the next election, either for themselves or their party. Last week, Americans voted in some off-year local elections, and the ruling party lost relative power, which is pretty standard, especially when you weigh the locales in question. That triggered some unflattering post-mortems, which is also pretty standard. Now we see the standard response: Tossing some rabbits to the hounds, aiming to both distract and figure out what may hold appeal in next year’s midterms. It is a time-honored bipartisan tradition. Most of it doesn’t go anywhere, but becoming policy isn’t the point. The point is changing the conversation gauging what may sway voters. And as we all learned in the first student council elections we witnessed, the best way to appeal to voters is giveaways.

So to us, talk of sending $2,000 tariff dividend/rebate/stimulus/whatever checks was right on schedule. It wasn’t the first time President Donald Trump talked of it, but it seemingly got more attention this go-round. Still, few seriously seemed to think it would happen. Such checks are in Congress’s purview (they control the government’s purse strings, as Civics 1 probably taught you), and a Congress that can barely maybe agree to end the longest-ever government shutdown isn’t likely to pass handouts swiftly. So we weren’t surprised when Treasury Secretary Scott Bessent quickly pivoted, casting already-passed tax cut extensions as a form of tariff rebate. And we doubt markets ever got excited for a potential check-induced consumer spending surge.

You can put the weekend chatter about 50-year mortgages in the same bucket. There was lots of handwringing about this adding risk to the banking system by flooding the market with less qualified borrowers—an echo of the panic over interest-only and subprime mortgages nearly 20 years ago. But just because people can do something doesn’t mean they will. The math isn’t there, as numerous articles have shown. Very few people will swallow paying interest worth twice the buying price over the loan’s lifespan in exchange for paying a couple hundred less a month. Even if longer-term mortgages did boost demand, home prices would likely rise in response, negating those theoretical monthly savings. The only solution to unaffordable housing is raising supply. That is a state and local matter, not federal.

We aren’t picking on the current administration. Every White House has ideas that flame out, even if they percolate longer than a weekend. The Biden administration was hot to tax unrealized capital gains and use tax changes to repatriate pharmaceutical production—didn’t happen. The Obama administration floated indexing the federal minimum wage to inflation—didn’t happen. Neither did adopting an energy windfall profits tax and redistributing the proceeds via $1,000 stimulus checks. The Bush II administration pushed hard for enabling workers to divert Social Security tax to personal investment accounts. Didn’t. Happen.^[i] The Clinton administration’s big-for-its-time stimulus program, proposed in 1993, didn’t fly either.

See all this for what it is: politicking. Proposals like these will always get headlines. Lots of them. That is their job. But stocks move most on probabilities, not possibilities, and can easily spot the difference. Few things politicians jawbone about have a realistic chance of taking effect. Even those that survive the court of public opinion rarely make it out of congressional committee, much less pass a floor vote. And those that do go all the way—like campaign pledges not to tax tips and Social Security checks—generally get watered down or morph beyond recognition into temporarily enhanced tax deductions for select folks. That leaves little surprise power, whether positive or negative, to move stocks.

So whether you cheer or fear whatever proposals come down the pike from here, regardless of which party floats them, take them all with a grain of salt. Ideas don’t drive markets or the economy. Actual, enacted policies are what matter, and few ideas complete that long, winding road.