Rising stock prices are not evidence of Trump ‘genius’

PHILADELPHIA — Whenever unflattering news comes out, President Donald Trump resorts to one of two strategies: attack some unrelated culture-wars punching bag or brag about the stock market. In the past month, he’s tweeted about stock prices more than every other day, on average.

According to Trump, the rising market is evidence of how awesome his presidency has been for the economy. At one point, he even touted a confused (i.e., wrong) claim that equity market increases were tantamount to wiping out our national debt.

Trump often complains that journalists ignore what’s happened to the stock market under his watch and particularly his record compared with President Barack Obama’s. As he tweeted last week, “Can you imagine if ‘O’ was president and had these numbers — would be biggest story on earth!”

So, let’s talk about why boasting about market movements is a bit boneheaded, shall we?

First and foremost, stock markets don’t reflect the underlying health of the economy.

Think of stock prices as a claim on the after-tax profits of a firm. Trump just signed a bill that cut taxes on companies. This means their after-tax profits will rise even if companies don’t expand, become more efficient or make any other pre-tax changes.

Of course, then, stock prices should go up. If they didn’t, something would be very wrong.

“Shareholders think they have more money in their pockets. That’s because, lo and behold, they do!” MIT professor David Autor told me at the annual American Economic Association meetings here over the weekend.

But, Autor adds, that doesn’t mean society got richer; we just shifted some money around: “This was a huge transfer of wealth away from taxpayers, and to corporations.”

Second, markets can also fall.

Perhaps Trump plans to start calling market data “fake” if trends turn inconvenient for him, just as he did with unemployment data.

Third, if the media were to judge presidents by stock performance, Obama would actually look better than Trump.

From Obama’s inauguration to Jan. 8 of the following year, the S&P 500 went up 42 percent; during the same period of Trump’s presidency, it’s gone up half that, at 21 percent. As for the Dow Jones industrial average, the numbers were 34 percent vs. 28 percent, respectively.

Finally, a point that hasn’t received enough attention: U.S. stock values may be up, but they’re up more in the rest of the developed world.

The S&P 500 is up about 21 percent since Trump took office. Now look at MSCI’s index of securities in countries across Europe, the Middle East, Asia and the Pacific. That’ s up 22 percent, just a hair higher.

If Trump’s economic platform is truly single-handedly responsible for stock market gains, it’s hard to explain why it would benefit the rest of the developed world more than it benefits us. Especially if you adopt Trump’s “America First” view of the global economy as essentially zero-sum.

We’re in a bull market that long predates this administration. Given that, plus the global context, it’s ridiculous — and risky — for Trump to use stocks as a benchmark of his administration’s success.