The markets are up and unemployment is down. But how much credit should President Donald Trump get for these feats?
The president often takes to Twitter to express his delight with the rising stock market, strong job market, and the health of the overall economy — taking it all as a general sign of his success since taking office in January.
Miraculously, the Dow is up over 11% year to date — in step with growth in profits.
As is customary, a president does get the credit and the blame accordingly for everything that occurs on their watch. And while it’s true that expectations of tax reform, infrastructure programs, and fewer regulations may have ignited the animal spirits of the stock market, these policy prescriptions have yet to become laws of the land.
Indeed, the Trump administration may strain credulity when it takes credit for corporate profit growth, job growth, and global economic growth, which combined have supported stock prices thus far this year.
Stock prices and profits growing in tandem is hardly a surprise — even if the growth of both may be surprising to some.
But it’s safe to say that many observers have been shocked to find that the stock market hasn’t suffered more than a 2% correction so far this year, despite policy failures in Congress and rising geopolitical risk all around the world.
Is Trump Really Responsible?
The stocks have been continuing their record-breaking rise with the Dow closing up nearly 40 points to its 41st record high since Trump’s inauguration.
The Dow closed at 22,370.8 on Tuesday, September 19th, according to Business Insider. It was also the seventh straight record closing in a row, having reached previous record highs on September 12th, 13th, 14th, 15th, and 18th, as well.
The president is not wrong for touting the stock market’s record highs. In fact, the Dow has reached a new high, on average, once every seven days since March 2013, signaling our economy’s full recovery from the Great Recession.
Other market indexes are at or near new heights, as well.
Hopes for action on tax policy, infrastructure spending, and deregulation have helped propel the market higher after the Trump’s inauguration. And although Trump and Congress have yet to deliver on the first two, investors are enthusiastic about a lighter regulatory touch by the administration. Stocks have also been buoyed by robust corporate earnings in the first half of the year.
More than three-quarters of respondents to this quarter’s CNBC Global CFO Council poll said that Trump deserves at least some of the credit for the stock market’s record run this year, and 17.1% of responders said he deserves “most of the credit.”
However, it would be foolish to place all of the credit at the feet of our president. There are a lot of factors that are working to improve overall conditions for the stock market, though Trump is indeed part of the equation…
Is North Korea Causing a Downturn?
Wall Street’s record highs fell off this past Monday as a selloff in technology shares and North Korea’s latest threats to Washington dragged many indexes down.
North Korea’s foreign minister claimed that Trump had declared war on the country and that they now reserve the right to take countermeasures, including shooting down U.S. bombers even if they are aren’t within North Korea’s airspace.
These harsh comments buoyed safe havens considerably (stocks favored by investors in times of crisis) with Gold (XAU) up nearly 1%.
Some of the biggest names of the S&P technology index dropped considerably, causing the index to slide 1.76% and putting it on track for its worst daily performance in over five weeks.
Some of the biggest drags included Facebook (NASDAQ: FB) down 4.81%, Microsoft (NASDAQ: MSFT) down 1.89%, and Apple (NASDAQ: AAPL) down 1.11%.
The Dow fell 65.31 points (0.29%) to 22,284.28, disrupting its overall upward trend.
In truth, all indexes reacted severely to the North Korean foreign minister’s comments. And I’m imagining this negative effect will continue if the threats and name-calling continues.
If actual war were to commence, it could mean devastation to the indexes all around.
The Bottom Line
Indeed, the stock market has been breaking record after record. But in truth, it’s not a completely credible measuring tool of a president’s overall performance.
There have been many influential presidents throughout our history who didn’t experience a Dow record during their terms.
Consider President Franklin D. Roosevelt. The longest-serving and one of the most consequential presidents scores a big fat zero in stock market highs, even though the economy came back from near death during his tenure and the market actually performed very well.
But all of this is not to discount Trump’s influence. If he were to leave office today, he will have presided over the greatest stock market performance of any president ever.
And decisions made in Washington certainly influence the course of the economy and of financial markets.
But the stock market is going do what the stock market is going to do. It doesn’t take orders from the White House.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today