25: Americans Are Miserable, and It's Swaying The Election

Episode Summary

Executive Summary: The episode examines how national mood, market performance, and political outcomes interact. Peter Atwater argues that Republican voters are deeply depressed while Democrats are vulnerable but less so, helping explain Trump and Sanders. Economist Carl Riccadonna then explains the misery index, saying it still predicts elections because voters reward or punish incumbents based on perceived economic direction, even if current U.S. misery is low by historical standards.

Main Topics: Bloomberg promo and show framing (Priority: 2/5): The episode opens with a promotion for Bloomberg’s Stock Movers, then transitions into Odd Lots’ focus on politics, markets, and public sentiment. National mood as a market signal (Priority: 5/5): Peter Atwater describes how confidence and distress can be measured through both hard data and behavioral cues, especially across income and wealth extremes. Republican depression and rise of Trump (Priority: 5/5): Atwater argues the Republican electorate remains highly stressed, with weak confidence reflected in Trump’s appeal and in xenophobic or authoritarian tendencies. Democratic vulnerability and Sanders (Priority: 4/5): The Democratic side is described as healthier than Republicans but still fragile enough that Bernie Sanders can remain viable against establishment expectations. Historical analogs to political upheaval (Priority: 4/5): The conversation links the 2016 political moment to the late 1960s, George Wallace, and even the Great Depression as examples of authoritarian candidacies during social stress. Misery index and election forecasting (Priority: 5/5): Carl Riccadonna explains the misery index as unemployment plus inflation, arguing it remains a strong predictor of presidential elections despite criticisms and current low readings. Relative gains, asset prices, and social cohesion (Priority: 4/5): The hosts close by questioning whether people care more about absolute economic improvement or relative outcomes, including whether the public would feel better if elites lost wealth.

Key Arguments: Public mood can be inferred from both quantitative indicators like Gallup confidence data and qualitative signals such as elite behavior or social unrest. Republican confidence is roughly as depressed as during the financial crisis, and current economic improvements have not translated into optimism among that base. The Republican Party is increasingly split between traditional pro-business conservatives and a more authoritarian Trump-aligned faction. Democrats are in a better mood than Republicans, but not positive enough to fully dismiss Sanders’ appeal. Market gains have disproportionately benefited the wealthy, contributing to a split between asset owners and the average consumer. Full employment alone has not restored confidence because wages lag costs for healthcare and education. The misery index remains useful because elections often hinge on whether households feel conditions are improving or deteriorating, not just on the absolute level of hardship. The public may not be happier if markets fall, but resentment toward financial elites could ease, reducing pressure for bailouts or elite rescue efforts.

Data Points: Stock Movers length: Five minutes or less - Bloomberg promo describing the format of the short audio market update Gallup economic confidence: Used as a daily indicator - Peter Atwater cites Gallup's Daily Economic Confidence Index as a core measure of public mood Bill Ackman condo sale: $90 million - Cited as evidence of euphoria among the financial elite Misery index election accuracy: 85% - Carl Riccadonna says the index predicts presidential elections with 85% accuracy Misery index election accuracy excluding 1976: 92% - Accuracy rises when the Carter-Ford 1976 election is treated as a Watergate exception Unemployment rate: 5% - Riccadonna describes the U.S. unemployment rate at the time of the discussion Expected unemployment rate by year-end: 4.7% - Private forecasters and the Fed expected a 30 basis point decline Expected core inflation change: +30 basis points - Riccadonna says core inflation was expected to rise modestly Daily economic confidence comparison: Equivalent to the financial crisis - Atwater says Republican mood is as depressed as during the financial crisis Market level: S&P 500 near all-time highs - Used to illustrate the disconnect between market performance and public mood Historical mood reference: 1999 and 1966 - Atwater identifies these as examples of broad-based euphoria Brazil misery index: Near its highest levels ever - Riccadonna notes the index is also elevated in Brazil during impeachment turmoil

Pivotal Quotes: "I think one of the biggest stories in the world right now is this process that we're seeing where parties that are deemed to be centrist of one way or another across Europe and the U.S. are seeing their support collapse." — Joe Weisenthal: Opening discussion of the political and market backdrop "What it tells me is that on the Republican side, it is very depressed." — Peter Atwater: Atwater explains the mood behind Trump’s rise "Are you better off now than four years ago?" — Ronald Reagan: Referenced by Carl Riccadonna as a classic misery-index campaign message

Implications: Listeners are urged to see politics and markets as linked through sentiment, not just macro data. The episode suggests elections may keep rewarding anti-establishment candidates while asset-price gains remain politically uneven.