Blaming Trump For Stock Market Drop And, Well…Everything | Stock News & Stock Market Analysis

Trump’s Crash?: The media have used the stock market plunge not as an opportunity to enlighten readers how our markets work, but as yet another occasion to bash Trump. Don’t they ever get tired of it?

Given Trump’s brash, take-no-prisoners nature when it comes to the media, it’s probably not surprising they might want some payback. But they do their readers no favor by politicizing yet another essential part of American life — the stock market.

After three days in which the bellwether Nasdaq stock index fell 6.7%, anti-Trump schadenfreude was pervasive on the web and in the media.

We ran a quick Google screen of “trump stock market crash” and in less than a second got 1.62 million hits.

CNN’s headline was typical: “A stock market lesson for Trump — the hard way.”

USA Today’s headline  on a piece by William Cummings asked: “Trump Has Often Taken Credit For The Stock Market’s Climb. Will He Own The Drops Too?”

Another USA Today column by Herb Jackson featured an almost identical theme:  “Politicians Who Crow About Stock Market Gains Face Hazard When Market Drops.”

Meanwhile, in The New York Times, Nobel-winning Trump-basher Paul Krugman wrote under this headline: “Has Trumphoria Finally Hit A Wall?”

Krugman doesn’t exactly blame Trump for the market drop, but suggests gullible market investors are guilty of falling for Trump’s childish idea that the economy can grow 3% a year, not the 1.5% pace that Krugman believes is the speed limit.

When the January jobs report came in last Friday showing a strong jobs gain and a sharp 2.9% annual rise in hourly wages, the largest in years, and then was followed by a steep three-day stock market decline, it suggested to Krugman that Trump’s 3% growth target is a fantasy, nothing more.

“So are we heading for trouble? Too soon to tell,” he wrote. “But if we are, rest assured that we’ll have the worst possible people on the case.”

There are other examples from the media, to be sure. And some, even economists, dragged out the old “overheating” metaphor, as if the economy were a Model-T Ford always on the verge of steaming over. But in economics, there is no such thing as “overheating.”

And for the record, if you’d like to go back and look, the data are clear: Higher wages do not cause inflation, which is the fear du jour that the media are selling and that the Fed will possibly respond to by jacking up interest rates.

Don’t readers deserve to hear a little more about how the stock market really works than just anti-Trump snark?

It’s true that Trump has often played up Wall Street’s gains. Last week’s State of the Union Address was a great example.

“The stock market has smashed one record after another, gaining $8 trillion in value,” the president said. “That is great news for Americans’ 401(k), retirement, pension, and college savings accounts.”

But what Trump said is absolutely true. And people forget that not only were prognosticators predicting that the stock market would plunge if Trump were elected president, but they seemed at times to actually be hoping for it to happen.

Again, Krugman’s famous comment, published the day after Trump’s election, is instructive: “It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? … If the question is when markets will recover, a first-pass answer is never.”

Got that? Never. For the record, since those words were published, the S&P 500 Index has risen 26%. And that’s after the recent big market drop.

Again, it’s unfair to single out Krugman, though he’s a tempting target. In the lead-up to the presidential election, many others in the media warned of a market crash to come if Donald Trump were to win.

So what happened? On election night,  Nov. 8, 2016, as IBD wrote a week and a half later, “fear consumed traders. At one point futures on the Dow Jones industrials index plunged 800 points.” Democrats were everywhere in the media, gloating.

Oops.  “By Friday, the index finished the week up 959 points, more than 5%,” IBD wrote back then, making the case for a Trump bull market that later became reality.

Yes, Trump can claim credit for the stock market’s general turnaround. But is every blip upward in the major stock indexes due to him? Is every slip down in share prices his fault too?

No. That’s absurd. Just as with any president, Trump sets the broader policies and hopes that they boost the economy, which underperformed during the Obama years. That’s exactly what has happened.

Trump set in motion economic policies premised on deregulation, low taxes and the rule of law. These three things alone have convinced corporations, small businesses and entrepreneurs that it’s a good time to be investing and building things in America.

In short, the stock market’s rise has been driven by the anticipation of higher productivity and greater profits to come for America’s makers and those who invest in them.

So why did markets tumble in recent days? The jobs data showed a surprisingly solid 200,000 gain in jobs and the best wage gains in years. This terrifies the inflation-averse bond market.

Inevitably, the bond vigilantes will pressure the Fed to raise interest rates more than the three to four times expected this year, to “cut-off” future inflation. That’s why the market panicked — not because Trumponomics is a fraud.

The point is, markets respond to existing conditions. Not to wishes or hope or change.

But they also anticipate trends in the near future. Given the market’s gains of the last 12 months and economic changes in the works, that future is much brighter than the media are telling you.


To learn more about the markets and investing, follow the links bel

How To Invest 

IBD’s Market Trends 

The Case For A Bull Market (2016)


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Originally posted 2018-02-07 08:13:35.


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