The explanations being offered for the bear market in stocks are as many, and as varied, as the list of shares with recent 52-week lows.

One batch of reasons has to do with monetary policy. The Federal Reserve has been too aggressive in raising interest rates in an economy that was cooling even before the sharp tightening by the Fed. Relatedly, there’s the complaint about the boom-and-bust cycle that characterizes fiat currency. 

Beyond monetary policy are the fiscal explanations. A binge of federal spending on everything from student loan forgiveness to Covid relief fueled inflation, as voices like Lawrence Summers and Steven Rattner presciently predicted. 

Fundamental analysts warn that after years of steady gains, price-earnings ratios are historically high. Students of stock-market patterns talk about reversion to means.

The geostrategic effects of the war in Ukraine — fuel sanctions on Russia creating uncertainty about Europe’s energy supply, $17.5 billion in American military aid — are felt in the stock market. 

Also felt are the lingering effects of the Covid pandemic and the response. Perhaps remote and hybrid workers are less productive, and the idea that American business could make as much money as it ever did even if the employees didn’t show up for work was a fantasy. For sure, the economies of many American cities and even suburbs are still adjusting to the effects of emptier office buildings.

There’s one explanation that you don’t hear much about that is nonetheless worth considering. That is the political explanation.

Stock prices reflect investor judgment about future earnings. Right now what the prices are saying is that investors are about 20 percent gloomier about future earnings prospects than they were at the end of 2021. 

It’s possible that the market is misjudging things now, but it’s also possible that the misjudgment was the earlier overpricing. In other words, investors are coming to terms with the reality that there’s no pro-growth political leadership on the near-to-medium-term horizon in the America.

On the Democratic side, that’s fairly obvious. President Biden is about the best the Democrats had to offer — an improvement over Senators Sanders or Warren — and even he has been a disappointment, raising corporate taxes, waging war on fossil fuels and the internal combustion engine, and expanding regulation and enforcement. 

A second-term Biden would be more of the same. His vice president, Kamala Harris, a former California state attorney general, inspires even less confidence. The Democratic congressional leadership of Speaker Pelosi and Senate Majority Leader Schumer sees the private sector primarily as a cow to be milked for tax revenue and campaign contributions.

What seems fairly new to me, and contributing to the bearish sentiment, is that there’s not much prospect of genuinely growth-oriented, principled, free-market oriented leadership even on the Republican side. 

The stock market soared under President Trump, but a Trump restoration would trigger a Democratic popular “resistance” that would make January 6, 2021, look gentle by comparison. Some people have high regard for Governor DeSantis of Florida, but his treatment of Disney as a kind of public punching bag is a worrying sign. He does not have a lot of private sector experience. 

The field of Republican leaders of national stature—governors, senators—drops off pretty quickly after that. The governor of Virginia, Glenn Youngkin, is worth keeping an eye on, but as with a lot of private equity types it’s hard to know for sure whether his fortune is built on real business acumen or on political skill in getting public pension funds to invest assets. 

Corporate America is so resilient and good at making profits that all it needs is a somewhat predictable and not terrible policy environment, rather than an arbitrary and unremittingly hostile one. The profits that matter to shareholder-owners and risk-takers, though, are the after-tax ones. 

It’s not only money supply and interest rates set by the Fed that matter to investors. If it looks like marginal tax rates are headed higher for the foreseeable future, a genuine market rally may wait for a political leader who can help to restore confidence. It may take a while, but experience has been that eventually it does happen.