Inside Dawn of a new down
Trump’s stock falls as market fears grow
It was, at least according to the late night tweets from the White House, proof that his reforms were working. Wall Street was on a roll. Ordinary Americans were getting richer. The Dow, the S&P 500 and the Nasdaq were easily beating every other major index in the world. If you needed proof that Donald Trump was making America great again it was right there on the tickers, and the president wanted to make sure that everyone knew about it – and that he deserved all the credit.
And now? With the stock market wobbling, he has gone strangely quiet. In fact, boasting about the markets may turn out to be a big political mistake. They have started to slide and we could easily be heading for a full-blown crash. Volatility has spiked since he took office, and it turns out his record has been mediocre at best compared to his predecessor. Smart politicians distance themselves from the markets as far as possible. But Trump has bound up his fate with the Dow Jones Industrial Average. Rewind to last winter, and Trump was constantly boasting as the markets touched fresh highs. “You’re seeing what’s happening with the stock market,” he tweeted in January. “People are appreciating what we are doing.” Later in the month, he was banging the same drum. “Unprecedented success for our country in so many ways. Record stock market, strong on military, crime and borders.”
Like a buy-side broker on steroids, he was quick to talk the Dow higher, and if there was a slight wobble he immediately blamed the Democrats. True, you can see the temptation. Despite the mainstream forecasts that Trump’s protectionist, spendthrift agenda would be a disaster for the economy, the markets responded positively to his election.
The “Trump bump” as it became known on the dealing floors was real enough. In October, the Dow Jones hit a record high, and it also chalked up its longest bull run on record, at least measured by length if not by strength. Some of that was down to momentum, but there is little question the president’s policies gave the market a boost. His radical reform of corporation tax was encouraging America’s corporate giants to bring cash home again, while slashing red tape held out at least the promise of reviving the country’s entrepreneurial spirits. With a growth rate touching 3.5pc, he could claim some success.
The trouble is, boasting about the stock market can be a big mistake – because it will so easily come back to bite you. Strangely enough, Trump has gone very quiet on equities in the last few weeks, with no mention of their performance on his Twitter feed since early November. A surprise? Not exactly. The index has taken a beating. The Dow has lost more than 2,000 points since its all-time high. In fact, its performance under Trump is already starting to look very average.
According to some number crunching by Bespoke Research in mid-november the near 25pc gain in the market since Trump was elected is less than under president Obama at the same point in his time in office. Perhaps more worrying for investors, the market has turned very volatile. The four biggest one-day drops in the Dow have all come during the Trump presidency (led by the 1,175 point plunge in February this year). You have to go all the way back to 2008 to find the fifth largest. The markets have become far more skittish since The Donald moved into the White House.
Trump deserves at least some of the blame for that. The latest sell-off for example has been triggered by his belligerence over trade with China. His open questioning of Federal Reserve policy has been spreading panic in the bond and equity markets. While some of his initial polices, such as tax cuts and deregulation, were great for equities, his protectionism is terrible for markets, and his chaotic approach to running his administration is starting to take a toll. If he helped the index up, then it is also clear that in the last month he has been taking it down again.
A more level-headed political leader would have been aware of that, and kept their distance from the Dow. Instead, Trump is addicted to boasting and vapid self-promotion. He took the credit for rising stocks. Now he can’t complain if he takes the blame for a crash. It will be completely deserved.
‘With the stock market wobbling, Trump has gone strangely quiet’