I’ve seen it argued both ways – that “Trump is president now” so he deserves credit for the continuous rise in the stock market. I’ve also seen it pointed out that “he’s been president for less than a year, so wtf has he really done?”.
And there’s also an argument for us still being within “Obama’s fiscal year”, which that one is way above my pay-grade. Any insights one way or the other?
Based on the graph, on this page, I wouldn’t say that there’s any particular correlation between the stock market and the President:
He hasn’t driven the stock market directly because he hasn’t actually done anything tangible but maybe his incompetence is the real blessing in the collective mind of the financial world. “he can’t fuck it up because he can’t actually get anything done”
Prior to the election predictions abounded of a potential market crash should Trump win.
The actual immediate reaction to the election showed a bit of shock to the financial system with overseas markets posting 2% to 5% drops. There was a momentary sell off and some news outlets seemed to gleefully report gloom and doom.
But that sell off in US markets, largely in after hours trading, was erased and the DJIA posted a sharp rise on Wednesday trading. By Friday close of business the DJIA posted its best week since 2011.
The market has continued to well outperform the analysts’ predictions in the event of a Trump win. IMHO this reflects a level of investor confidence that well exceeds somewhat bearish forecasts from institutional investors. The market is voting with its dollars and doing even better than analysts had predicted for a Clinton win. Give the credit for this one to the Donald.
Even if one assigns responsibility to Trump (which isn’t obviously true), we don’t even know whether we should be crediting anyone for this yet. Maybe, in a few years, we’ll be looking for someone to blame. A short-term rise is not inherently good for people, the economy, or even the stocks that see their values rise. Lehman Brothers stock nearly tripled in value from 2003 to 2006. Who wants credit for that?
It’s based on anticipation of business friendly executive orders (a minor few of which have happened), drunken-sailor infrastructure spending, and “tax reform.” He gets credit for that.
If those don’t happen, at least some of the gains will be repealed. He won’t take credit for that, he’ll blame whoever’s he’s watching on TV at the moment.
Also, the breadth of the market isn’t great, a lot of gains are in a small number of stocks, which is not all that uncommon. But because of index ETFs, everything gets brought along by those biggies.
Keep some cash handy for the day when the algos unleash the day from hell.
What specifically did Trump do personally that caused a market increase?
We all need to remember that the economy tends to go in boom-bust cycles no matter who is in office. Also, the President has very little true power over the economy. Congress and the Federal Reserve have far more influence at the federal level. The choices made by governors and state legislatures also add up to a vast amount of influence over the nation’s economy.
Before answering this question, ask yourself whom you would blame if the market were down 20% from January.
I would look at as many factors as I could possibly understand and try to assign blame to those factors that deserved it. If Trump did something that could be shown to have caused it, partially or in whole, then I would blame him for what he did or didn’t do. Likewise, if someone wants to claim that he should be credited for whatever uptick has happened then it has to be shown what he did to cause it.
Count me as another vote for “the President has little to do with the stock market”. Sure, some sectors see benefits to the idea of Republicans in power: less regulations, business friendly, financial and energy sectors benefit. Actual attempts to replace ACA would tend to give insurance, drug, and medical sectors a boost. But other areas are not as clear cut. If they go all in for blowing up trade across border, that might cause a drag instead. Hard for me, a mere mortal, to say.
ISTM that the uncertainty that the election season caused was holding back some positive movement. Once the election was decided, there was more certainty, and positive movement was unleashed. I would have predicted the same positive movement no matter who won, simply on the backs of removing uncertainty.
(Yeah, I’m auditioning to be a pundit on the financial channels…)
Actually, you done good. IMO most of the positive market movement since Nov is not attributable to Trump or “Trumpism” (whatever that may be), but simply to a Republican majority in Congress and the absence of an impending election.
As and when the current divided ineffectual Congress and the clueless ineffectual Presidency are recognized as accomplishing very little of what was hoped for, the market will go into reverse. perhaps rapidly so.
The alternative (and this skates close to CT territory) is that the real news isn’t news at all, but is a wide-ranging *sub rosa *effort to gut the regulatory enforcement mechanisms and instill something close to the Yeltsin era “Oligarchs” running the country. Which will be vastly profitable for the folks on the correct end of that transition, and those who can buy the public shares early and sell them before the latter stage forced privatization / confiscation.
Either way, it’s mostly a bubble. Which, as with every bubble, is hugely profitable in the near term. Until it suddenly isn’t.
The stock market is hugely driven by psychological factors in the short term. It is not that Trump has signed any particular law and we are ascribing stock market gains to that particular policy change. It is the expectation, anticipation, and gut feeling investors have that has driven the recent market gains.
Come back in a year and evaluate the sentiment in the market once investors have seen what has, or has not, actually been done.
Iggy nailed it.
I follow the market a little bit, and most analysts think that the stock run-up had a lot to do with increased investor confidence, due mainly to the investor-friendly rhetoric coming from the Trump administration.
The left really underestimates the drag regulations can impose on an economy. Under Obama, regulations had been ramping up steadily year after year, and in my opinion they have held back growth in the market, depressed confidence in the economy by investors and stunted small business startup rates.
So along comes Trump, who promises to roll back a lot of those regs. And, it’s not just talk - the people he has appointed to the various regulatory agencies are exactly the type who would roll back regs (if anyone can). Trump has also signed numerous executive orders undoing Obama’s executive orders.
That, plus his talk of tax cuts, the complete control of government by Republicans which should have in theory made it easy to do some of these things, and his plan for big infrastructure spending has juiced up those ‘animal spirits’ in the economy. I expect we’ll find that small business startups increase as well.
However… That talk has to be followed by action. There has actually been quite a bit of action on the regulatory front, but tax reform is looking iffy, the health care bill is turning into a debacle, and Trump’s idiocy may overshadow all of it if someone doesn’t immobilize his twitter finger.
That would require a long honest look in the mirror. I suspect some here don’t even own mirrors.
The presidency’s impact can, and often is, over-stated, but the president’s not an inconsequential figure either.
The stock market has been trending upward mostly because of strength in the economy, which he inherited upon taking office. The market was also relieved once the election campaign cycle was over because it now had a greater sense of certainty and had a better sense of what the policy over the next 2-4 years might look like. If you want to give credit to Trump for one thing, I think it is probably fair to say that the investment analysts probably do look forward to tax cuts and less regulation, which is considered to give businesses greater flexibility. So I do think Trump’s election victory, in and of itself, was seen by many in the business world as a positive outcome.
But the problem with investment analysts is that they get paid to be myopic. I don’t see how anything the Republicans are proposing is going to help the economy in the long run, and it seems almost certain to inflict a lot of misery for the working poor and middle classes. The loss of jobs due to e-commerce and automation is a problem that won’t be solved by building a wall or bringing back coal. And taking away healthcare spending for the poor so that billionaires with property in the Caribbean doesn’t seem particularly beneficial either. We’ve got student debt passing $1 trillion. Environmental degradation that could soon turn to massive catastrophe. Time will tell, though.
Without getting into the reasons why we need regulations, I’m sure there must be good peer-reviewed studies on this out there. Cite, please.
This also needs a cite.
“In my opinion.” We finally have a cite.
Seems so obvious to me that a cite would not be needed.
Nevertheless. Regulation reached an all time high under Obama, per Dudley and Warren. See Weidenbaum Center on the Economy, Government, and Public Policy and the George Washington University Regulatory Studies Center Regulatory Report
Regulatory spending, in inflation adjusted dollars, reached an all time high under Obama. Albeit regulatory spending reached a new high under every single president since Eisenhower. The rate of regulatory spending increased higher under GW Bush than Obama largely due to the implementation of the TSA and reorganization of teh Department of Homeland Security.
Obama had the lowest labor rate in decades. It takes a while to repair this type of damage, but under Trump, the labor participation rate has gone up and unemployment is the lowest in the past 8 years.
So Trump deserves some credit, but the true impact of Trump’s vision will be a lower cooperate income tax rate and more labor/manufacturing based in the USA. Then you’ll see a larger effect in unemployment and the stock market.
And in sheer number of government rules, it has been a one way trip upwards since the 1970’s.
This chart was compiled by the US Chamber of Commerce reflecting the total number of government regulations and their year-on-year growth. Again, nothing but more regulation every single year for more than 40 years.
Unbelievable! What Washington needs is an outsider to come in and clean out that regulatory swamp. Someone who made his mark as a businessman, and who isn’t a typical politician!
N.b.: Not mocking you, Iggy. Just making a joke.
