According to a report released by the leading investment research firm NDR (Ned Davis Research) on Wednesday, the low approval rating of US President Biden may be a good omen for US stocks.
For most of the time since Biden took office, his approval rating has been low. According to data from Gallup, a research firm, Biden's approval rating peaked at around 57% in the first few months of his tenure, but has since been declining, currently at a historic low of 37%.
Biden's low approval rating is mainly related to Americans' pessimistic views on the economy, although from most indicators, the foundation of the US economy seems to be still solid.
The latest survey conducted jointly by CBS News and YouGov shows that more than three-quarters (76%) of respondents said their income cannot keep up with price increases. Meanwhile, 62% of people complain about the poor state of the US economy, while 56% attribute inflation issues to government spending.
Or it could be beneficial for US stocks
According to NDR, although low approval ratings are undoubtedly bad news for Biden, they may be good news for the US stock market.
According to NDR research, the average annual return on the Dow Jones Industrial Average is as high as 9.9% when the President's approval rating in Gallup polls is between 35% and 50% (as is currently the case).
When the presidential approval rating is between 50% and 65%, the average annual return on the Dow Jones index is 7.6%, while when the approval rating is above 65%, the average annual return on the Dow Jones index is only 2.4%.
However, the lower the presidential approval rating, the better. Once it falls below 35%, the stock market will experience a significant decline. According to NDR, in this situation, the average annual decline of the Dow Jones index is 12.7%.
As the US stock market rebounds this year, investors' optimism has been heating up. But due to a lack of confidence in the US economy and the president, this optimism has been partially offset.
NDR points out that its research suggests that although investors are already extremely optimistic, there may still be more room for long positions in US stocks.
On Wednesday Eastern Time, the three major US stock indexes collectively closed higher, with the Dow reaching a historic high and the Nasdaq and S&P 500 reaching new highs since the beginning of last year. Previously, the Federal Reserve hinted that its interest rate hike policy would end and borrowing costs would decrease in 2024.