Trumpian mantra: Weaponize everything.
President Donald Trump said in a press conference Wednesday that he believes the stock market will recover its steep, multiday losses and said that fears a Democrat could win the election contributed substantially to the sell-off along with the coronavirus.
“I think it took a hit maybe for two reasons. I think [investors] look at the people that you watched debating last night and they say ‘if there’s even a possibility’” a Democrat is elected the economy will decline, Trump said. “I think the financial markets are very upset when they look at the Democrat candidates standing on that stage making fools out of themselves.”
“I think you can add quite a bit of sell-off to what” the Democrats are saying in debates, the president said.“And it certainly took a hit because of [the virus] and I understand that’s also because of supply chains and various other things,” he continued. “But I think the stock market will recover. The economy is very strong. The consumer is the strongest it’s ever been.” [CNBC]
If you have a short memory – or just haven’t invested much – how have markets done when Democrats are in charge? Let’s start with Trump’s predecessor, President Obama.
When Barack Obama was sworn in as the 44th president of the United States on January 20, 2009, the U.S. stock market was in free fall. The financial crisis was in full swing following the collapse of Lehman Brothers and the Standard & Poor’s 500 index, a popular measure of the U.S. stock market, closed at 805 points on Inauguration Day.
Eight years later, the S&P 500 index has risen to 2,274 points after one of the great bull runs in stock market history. With Obama as president, the U.S. stock market, as measured by the S&P 500, returned 235%, or 16.4% annualized. [Forbes]
Generally, 10-11% is considered very good. 16% annualized no doubt reflects Obama’s start in the Great Recession. But – his management could have also failed. For the conservative who is investing (vs a conservative investor, a completely different animal), this is a comparison of the competing ideologies of Republicans, lead by George W. Bush, and the Democrats of President Obama. The 16% number is not an outlier to be disregarded, but an indicator of the speed at which the American economy returned to its usual pace. (The careful reader will note my failure to call it a healthy economy; the failure of wages to rise as unemployment dropped and of a Federal prime rate that threatens to plunge below 0% concerns me, but I’m not enough of an economist to prognosticate on it, and my only real economist friend is away at college.)
How about President Clinton? Oh, hey, here’s a chart comparing the performance of the stock market under Presidents back to Reagan! From CNN:
Clinton experienced the DotCom bubble, thus the little dip at the end. But this chart should make clear that the Democrats, to the extent the party in power can manage an economy, have not done badly: They come in at 1 & 2. Investors should be grounded in reality; those who stubbornly cling to an ideology incompatible with reality are, well, failed investors. So when Trump tries to blame a market concerned about a pandemic on Democrats, it’s time to wrinkle one’s nose at another bad Trump judgment.
If you’re an inexperienced investor, by which I don’t mean years of investing, but instead you’ve never really explored the international economy and how much we depend on trade, that last paragraph of Trump’s is actually the most important of his banal use of anything that comes to hand to swat at the Democrats. If, in fact, countries do not shut down their borders, their factories, and the freedom of movement, then Trump will most likely be right: recovery will come.
But if the opposite occurs, we’re going to catch the dark side of long term free trade: goods no longer made by anyone but specialist countries will become unavailable, supply chains will break, and we may be facing both an economic and health mess.
