Biden's stimulus is one reason why S&P 500 is rallying this year: Strategas

Strategas analysts highlighted that President Biden's aggressive pre-election stimulus measures are significantly contributing to the S&P 500's rally this year.

The IRS and FHFA recently announced new initiatives to bolster the U.S. consumer, which are seen as part of a broader strategy to stimulate the economy ahead of the presidential election.

One of the key factors driving this stimulus is the "liquidity drain" observed last week, which saw $130 billion drained due to higher corporate tax payments and the roll-off of T-bills. This trend is expected to continue for two more weeks before liquidity starts increasing in July and surges in August.

Strategas also notes that the upcoming presidential debate on Thursday is a major catalyst for the election. While President Biden's approval rating and national polling improved last week, he still trails behind. They add that the debate is a crucial opportunity for Biden to frame the election as a choice between him and Trump, a task he has yet to accomplish effectively.

The firm notes that historically, the S&P 500 has increased in every presidential re-election year since 1944, with an average rise of roughly 16 percent.

Strategas believes this pattern occurs because presidents tend to "prime the pump" ahead of elections, using more active tools this year than in the past.

As a result, through June 21st, this has been the second-best S&P 500 return in a presidential re-election year since 1964. Strategas says that stocks have generally performed better in re-election years compared to open presidential election years by an average of 1300 basis points, providing a cushion for equity markets during these periods.

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