President Trump may have helped stock markets overall, and he has been a fairly market friendly president, but his influence here is nowhere near close to what he proclaims.
Donald Trump has never been known for his modesty, not when in business, and certainly not as president of the United States. While stock markets have done well during his tenure in office, so far anyway, he not only is taking the credit for this, he also is claiming that his being president has saved us from a massive market crash.
These are actually two different claims here, being to thank for both the bull market since and also being responsible for preventing a very big crash. Comparing the Dow being where it is now to where he is claiming it would have been if Hilary Clinton had been elected president also builds in the claim that presidents decide these things, not only partly, but totally.
Trump, in one of his many tweets, goes as far as to claim that “had the opposition party (no, not the media) won the election, the stock market would be down at least 10,000 points by now. We are heading up, up, up!”
By the “stock market,” he is obviously referring to the Dow, since it’s the only major index that could drop that much and not drop into the negative, although the other major indexes have all moved along in a similar way, as they generally do. This is because they are all primarily driven by what we could call the overall market sentiment, and this correlation is actually the best practical example of how big of a role market sentiment plays in the movement of the prices of stocks.
Even though indexes such as the Dow, the S&P 500, and the Nasdaq all contain completely different baskets of stocks, those who think that stocks move according to what’s going on with the stock have the opportunity to observe how much this hidden force has so many stocks and indexes in particular moving very much in concert.
Therefore, we can use the phrase “the stock market” and any of the major indexes pretty much interchangeably, so Trump’s calling the Dow the stock market may involve misspeaking, but not in a meaningful way really.
Reality Rears Its Ugly Head
Whether or not stocks have fared better with Trump in the White House than they would have with Hilary Clinton in power is one thing, and we may actually be able to come up with some pretty good arguments in his favor, but to suggest that the difference would be so mighty is quite another.
To those who study such things, this would at the very least push the envelope of credibility, and to be honest, this takes us way beyond it. If Trump is to be believed, instead of the Dow being at almost 26,000 as it is currently, we’d see it all the way down to 8,529 if it gave back 10,000 points from the point where Hilary Clinton would have taken office.
Markets move in all sorts of trends, from the smallest ones to very large ones, and the long-term trend had been moving up long before Trump even considered running for president. This momentum can be altered by a number of things, but all of those things save one has had its full say in stock prices, with that one thing being the Donald getting elected over Hilary.
While we may be able to imagine events shaping stock markets by this huge of an amount over time, they involve things of monumental influence. This is a difference of more than just 10,000 Dow points, it actually involves 17,600 points, the difference between losing the 10,000 points that Trump is alleging we would have dropped, plus the roughly 7,600 points we’ve gained since he took over.
This is a difference of 67% of the current value of the Dow, and we’ve only seen one time in the history of the American stock market that produced change this massive, which was the period between 1929 and 1932. Things operated a lot differently back then, and all the leveraging that went on then placed the stock market at far more risk of a reversal, and this leverage did manage to implode the market.
We really haven’t seen any real crises during the last 3 years, and while Trump may have helped propel stock markets more forward than, perhaps, we would have seen with someone else at the reins, this difference at best would not be anywhere close to being as big as Trump is suggesting.
It’s even hard to imagine our not being higher now than we were back then, with the difference likely manifesting in, say, a 3,000 or 4,000 move up rather than the 7,600 we’ve enjoyed. Trump is seen by many as being more business friendly than most, particularly most Democrats, as we could argue that Democrats by nature focus less on big companies and big shareholders than Republicans do, especially Mr. Trump, but this can only take you so far.
Trump May Deserve Some Credit, But Not Exaggeration
With the way that the market has moved since he stepped in, and knowing how Trump thinks, it appears to be perfectly natural for him to suggest he’s the main reason for rising stock prices, or maybe even the sole reason. When we look at the myriad of factors that influence stock prices though, it is difficult to imagine this being possible, or what a president would have to do in order to drive markets so much.
Presidents can certainly mess things up quite a bit though, and for instance causing a global nuclear war would certainly qualify, as well as lesser things such as erecting trade barriers and raising tariffs.
This is therefore not so one sided, and while President Trump has done some things which stock markets like, he’s also done some things that they don’t, and we already know that trade concerns and loss of access to markets that resulted from this are weighing on stocks at the very moment that these remarks were made.
In the end, should we reach a place which ends up being even more business friendly and market friendly than we would have gotten to if not for Trump’s efforts, we could say that his influence was even greater. As always though, perhaps not quite as great as Trump believes.
Anyone else making these remarks would lose a lot of credibility at the very least, but Trump can get away with such things more, because he has already lost so much credibility in the eyes of many, although remarks like this don’t help things. This claim is even ridiculous by his standards, and demonstrates a lack of even basic knowledge about how financial markets work.
On the other hand, maybe he does know more than he shows here, and this knowledge has simply been trumped by a much bigger force, his ego.