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Trump’s Stock Market Myth-Making

Donald Trump

The stock market, especially the Dow, has been performing very well under Trump. Various measurements do, in fact, indicate the “record-breaking” gains which have been repeatedly claimed, but whether or not we decide to quibble with the selected metrics, Trump’s first year stock market performance is definitely in the top five, alongside names like George H W Bush, Roosevelt, and Obama.

And this is where we hit our first snag: the phrase, “Trump’s first year performance”. Western governments in general, and US Presidents in particular, are consistently given far too much credit and/or blame for the state of the economy. It seems there are two kinds of cognitive dissonance at play. The first is the fact of most democratic elections being fought with complex economic policies as one of their major pillars. The vast majority of the populace simply does not understand even the most basic principles of economics, and yet they are generally unshakably convinced of the rightness of their chosen candidate’s economic policies. But by far the most germane dissonance is the tendency to praise the President for encouraging the growth of a Free Market Economy, while simultaneously crediting him as if he were in charge of a Command Economy. Trump is not unique in this regard. The tendency of all political discourse around economics is to fall prey to this serious logical fallacy. Western democratic governments do not control their economies. This is in accordance with one of the fundamental principles of Western democracy. This means that simplified, cause/effect views of economic policy and activity need to be taken with a grain of salt, and if they also come with a package of cheerleading for one or another form of ideology, then it is a cubic tonne of salt which is required. Looked at objectively, giving sole credit for economic performance to a POTUS is akin to crediting the umpire, and the umpire alone, for an Ashes win.

Of course, not everyone falls prey to this kind of thinking, regardless of how much politicians try to encourage it. There is, of course, a significant minority of the electorate, including commentators and analysts, who possess sufficient nous to understand the true nature of the nexus between government and economy. Discourse at this level tends centre much more sensibly and accurately around the role of governments as regulators and influencers of economic performance and activity. In these circles, the unusual degree of credit/blame assigned to POTUS makes more sense – the office has a peculiar and unique influence on both the global and national economies, for a whole complex of reasons far too tortuous to elucidate here. Let’s just say that military and diplomatic power, geography, and the interplay of various economic cartels, make the attitude and actions of a US President particularly significant. Where this all falls down, however, is in the areas of ideological partisanship and the very real fact that economics is almost purely theoretical.

It is no secret that the bulk of the US media is now, and always has been, openly partisan. There are clear and obvious identifiers, when looking at the US media, which allow us to label most outlets as either Democrat, Republican, or tinfoil hat crazy. If we take the very sensible decision to leave outlets like Alex Jones, Breitbart, and Raw Story out of the picture, a quick sampling of Democratic and Republican outlets helps us to see the extent of this problem when it comes to clear-sighted evaluation of Trump’s administration as positive or negative economic influencer. When we look at the Dow Jones Index in isolation, the gains under the current administration outstrip everyone but Roosevelt. When we look at absolute dollar value of the market, Trump comes in a distant second to Obama. But these rankings don’t really mean anything. Outlets like Bloomberg, for example, tread very lightly – almost imperceptibly – over the fact that Obama’s Keynesian response to the GFC means that the dollar value measurement is always going to exceed that of a president walking into a relatively strong economy. And what focus on the Dow alone ignores is the value of a measurement biased so heavily towards theoretically questionable assumptions on the effect and impact of equity market adjustments. But what can be said, without question, is that theoretical extrapolations of cause and effect can be constructed to favour Keynesian, monetarist, neo-conservative, Democrat, Republican, Libertarian, or (somewhat less convincingly) Illuminati based ideological positions, with breathtaking ease.

In terms of reporting, all sides of the political divide are more or less equally guilty of cherry-picking, bias, and selective memory. The facts are basically ineluctable, and apply to all presidents – all governments, in fact – claiming sole credit for economic performance. It is usual for stock market value to increase, and to increase sharply in the first year of a presidency. This is partly because it tends to dip around election time, but mostly because that first year is when most presidents increase and retrench spending in certain areas, and thus clarify their intentions, providing a degree of certainty. There is, however, a real Trump effect happening in this instance. Possibly the only thing Trump has been clear about is his intention to be business friendly. So the boost deriving from this certainty within the business community is, in fact, down to him. But a great deal of the economy’s strength has to do with both local and global factors which are not only outside his control, but of the control of any sitting government. And given Trump’s destabilising effect in other areas, it’s very important to be clear-sighted about the one positive claim of his which actually has some credence.

Category: Politics, Trump Tracker


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