For all that bragging by Trump about the stock market, he should have known that this run would not last. Of course, if he understood how markets worked (and no, working in a family owned real estate business does not qualify), he’d know that runs like the one we’ve had do not last. As of this writing, the Dow Jones Industrial Average was down over 1,000 points (4 percent).
Someone that knows about the market would also know some of what else Trump brags about could, in fact, have an adverse effect on stocks. Such as:
- Rising wages
- Inflationary fears
- The talk of interest rate hikes
This Politico piece spells out some more:
On top of concerns about rising inflation, the tax cuts are already increasing the federal government’s need to borrow and accelerating the date by which Congress must raise the federal debt limit. And as of Monday, there was still no plan in Washington to raise the limit and avoid a catastrophic default.
The result is that a president who tossed aside traditional presidential caution in cheerleading the stock market now stands poised to take the blame for any correction.
“This is a risk that the president clearly set himself up for,” said Charles Gabriel of Capital Alpha Partners, a Washington research firm. “Until now, Trump’s had kind of a free ride in this market and taken so much credit for it, even though so much of it was due to easy-money policies from Janet Yellen and the Fed. Now she’s out the door and volatility is back.”
The correction we’re seeing could very well be temporary. With a market over 20K, 2-4 percent drops are nothing to go crazy about, but if these losses are sustained, it could lead to other fears. As much as people like to (correctly) point out the stock market is not indicative of the overall economy, perception often affects reality.
Time will tell but I suspect Trump won’t be tweeting about the stock market anytime soon.