It’s a question worth considering as stock prices trade near record highs even as the longest US economic expansion in history shows signs of losing momentum. It’s a question worth considering as Democratic presidential candidates offer up audacious but unproven plans to overhaul policies for health care, trade, climate change, and immigration that could redefine just what kind of economy and democracy we have. And it is a question worth considering as President Trump makes clear he won’t hesitate to defile American politics and defame democratic institutions (an independent Congress, central bank, news media) to get reelected.

This country was built on the twin foundations of democracy and capitalism. But does Wall Street, the emblem of our free market system, care if American democracy is debased, as long as the profits keep rolling in?


For those of you who don’t spend the summer tracking stock prices, the market has been climbing to new highs since bottoming out in late December. The strong job market and healthy consumer spending have overcome investors’ concerns about the impact of the trade war with China and slowing global growth.

But most of all, investors are buying because the Fed has all but promised to cut interest rates, likely after its next policy meeting on July 30-31. Just seven months ago, the Fed was on a campaign to boost rates to keep the economy from overheating.

Lower rates make stocks more attractive compared with fixed-income investments such as US government bonds, and act as a kind of insurance policy against cooling growth by making sure there is plenty of cheap money for consumers and businesses to borrow.

“The global economy is slowing, and has been for more than year. The US was bucking that trend — until now,” said Jurrien Timmer, director of global macro at Fidelity Investments in Boston. “The market believes that this is a soft patch that will pave the way for ongoing growth as the Fed steps in just at the right time.”


Give equity investors low rates, decent economic growth, and rising corporate earnings, and they are content. It doesn’t seem to matter when Trump acts more like a dictator than a president: berating the Fed in an effort to influence monetary policy; refusing to comply with legitimate requests from Congress; threatening mass roundups in immigrant communities; and relentlessly seeking to obscure the truth by lying.

Not the kind of behavior that should inspire investor confidence — unless, of course, the same president cuts taxes and guts regulation of the environment and big banks. Complicity? No. Enabling by turning a blind eye? Absolutely.

But investors should be worried, and lower rates from the Fed won’t save us from the president’s worst instincts.

The central bank has eased rates when stocks traded near record highs before, but not since 1996, as MarketWatch noted earlier this week, citing market analyst Charlie Biello of Pension Partners LLC. Previous “insurance cuts” have worked in five out of the last six instances, according to Fidelity’s Timmer. The exception: the one made just before the Great Recession.

Will the Fed save the day this time?

Probably not, said Megan E. Greene, a senior fellow at Mossavar-Rahmani Center for Business and Government at Harvard’s Kennedy School and a member of the board of the National Association for Business Economics.


“Interest rate sensitive sectors (mortgages, cars) seem they may be tapped out for this cycle already and credit supply/borrowing costs are hardly a constraint on businesses,” she said in an e-mail. “The Fed couldn’t stoke inflation or growth with rates at [near zero], so are a few rate cuts from 2.5 [percent] really going to make a huge difference? I’m skeptical.”

So am I. Even if the Fed buys us a couple more quarters of economic growth, the markets are ignoring problems that will haunt us in years to come if we don’t deal with them soon: income inequality, rising sea levels, stagnant wages, costlier health care, and so on.

“The markets don’t care about issues of race and inequality because these issues have a huge impact on growth and therefore the markets in the medium- to long-term, and most investors have a very short time horizon,” Greene said.

These are dispiriting days in the life of our democracy. It’s time for Wall Street to reckon with something deeper than quarterly profits.

You can reach me at larry.edelman@globe.com and follow me on Twitter @GlobeNewsEd.