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Photo illustration: Annelise Capossela/Axios. Getty Images photos: Andrew Caballero-Reynolds/AFP and Lev Radin/Pacific Press/LightRocket

President Trump trails Joe Biden in most polls, has generally lower approval ratings and is behind in trust on most issues. Yet polls consistently give him an edge on the economy, which remains a top priority among voters.

Why it matters: If Trump wins re-election, it will largely be because Americans see him as the force rallying a still-strong U.S. economy, a narrative girded by skyrocketing stock prices and consistently climbing U.S. home values — but the man behind booming U.S. asset prices is really Federal Reserve chair Jerome Powell.

Reality check: It is Powell, not Trump, that Wall Street credits for the stock market's return to all-time highs, even in the face of the worst economic collapse in U.S. history last quarter.

  • That's got many voters feeling the "wealth effect" — a greater belief in economic strength and confidence when the value of homes and investment portfolios rise — despite the fact that only half of Americans own stocks and more than 80% of equities are held by the top 10% of households.

Trump's 2017 tax cut certainly helped the market, but its effects were offset in no small part by his trade war with China and the uncertainty caused by Trump's diplomacy-by-tweet style.

The intrigue: Powell has gone above and beyond the actions of previous Fed chairs to boost markets. His course correction in 2019 to lower U.S. interest rates and restart the Fed's massive bond-buying program in the midst of a strong U.S. economy was controversial, but helped power the S&P 500 higher by 30%.

  • This year, Powell's decision to roll interest rates back to zero and provide markets with $3 trillion in liquidity has kept stock indexes hitting record highs even as close to 30 million Americans collect unemployment benefits.
  • And the promise of unlimited asset purchases, including buying bonds from trillion-dollar companies like Apple and even companies with "junk" credit ratings in March, has been described as "unprecedented."
  • Some even argue Powell violated the Fed's founding charter, the Federal Reserve Act.

What they're saying: The Fed and other central banks effectively "nationalized" the market for government and corporate bonds, strategists at Bank of America said in a note to clients in mid-July, helping lead to "irrationally" high stock prices.

  • "Free market enterprise no longer exists," Scott Minerd, chief investment officer of Guggenheim Partners, told me last month. "The Fed by essence of what it's doing has taken control of the market."
  • And the central bank's recent pledges to keep interest rates at nearly 0% through at least 2023 has removed the threat of higher interest rates, bolstering sentiment for stocks, precious metals and home buying.

The big picture: The Fed's impact has helped keep eyes trained on record high equity indexes and away from spiking job losses, rising food insecurity, a growing trade deficit with China, a national debt nearing $27 trillion and a debt-to-GDP ratio on pace to be the worst in history.

  • The latest PBS NewsHour/NPR/Marist poll found that 20% of respondents rated the economy as their top issue — it was No. 1 among those who identified as Republicans — and half of Americans see Trump as a more effective leader on that issue, compared to 43% for Biden.

Go deeper

Dion Rabouin, author of Markets
Jan 4, 2021 - Economy & Business

Which asset classes performed best in the market frenzy of 2020

Data: FactSet; Chart: Axios Visuals

The everything rally delivered big gains to just about every asset in 2020, thanks in large part to unprecedented action from the Fed and Congress.

By the numbers: U.S. equities ended 2020 higher on the last day of trading, with stocks registering strong gains — the Nasdaq rallied 44% on the year while the Russell gained 19%.

Mike Allen, author of AM
2 hours ago - Politics & Policy

Biden's "overwhelming force" doctrine

President-elect Biden arrives to introduce his science team in Wilmington yesterday. Photo: Kevin Lamarque/Reuters

President-elect Biden has ordered up a shock-and-awe campaign for his first days in office to signal, as dramatically as possible, the radical shift coming to America and global affairs, his advisers tell us. 

The plan, Part 1 ... Biden, as detailed in a "First Ten Days" memo from incoming chief of staff Ron Klain, plans to unleash executive orders, federal powers and speeches to shift to a stark, national plan for "100 million shots" in three months.

Off the Rails

Episode 2: Barbarians at the Oval

Photo illustration: Sarah Grillo/Axios. Photo: Jim Watson/AFP/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 2: Trump stops buying what his professional staff are telling him, and increasingly turns to radical voices telling him what he wants to hear. Read episode 1.

President Trump plunked down in an armchair in the White House residence, still dressed from his golf game — navy fleece, black pants, white MAGA cap. It was Saturday, Nov. 7. The networks had just called the election for Joe Biden.

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