Donald Dossier: It's the Economy, Stupid
WHY YOU SHOULD CARE
The stock market doesn’t correlate with electoral success or failure, but Trump is right to be spooked.
By Daniel Malloy
Democrats will endanger your retirement fund. That was the message the president delivered Thursday, an indication of the fear on his mind the day after the Dow Jones Industrial Average freaked out about a global slowdown and dropped by 3 percent.
“You have no choice but to vote for me, because your 401(k), everything, is going to be down the tubes,” Trump said. “Whether you love me or hate me, you’ve got to vote for me.”
The roaring stock market has been a central part of the case Trump has made to this point for his reelection, along with record-low unemployment and other indications of a strong economy. It’s left his potential Democratic foes in “Yes, but” mode when talking about the economy. Yes, but wages haven’t grown as much as they used to. Yes, but Trump’s trade wars are hurting farm country.
The stock market is far from a perfect predictor of electoral success.
A downturn means you’ll hear a lot more of this from Trump: Yes, but … socialism.
The reality is, your 401(k) has done well. The day before Trump’s inauguration, the Dow stood at 19,732.40. At week’s end, it was at 25,866.01, rebounding from the midweek plunge. If we’re judging purely on market performance (leaving aside the ridiculousness of assigning credit or blame to the president for Wall Street ups and downs), the Trump market is doing about as well percentagewise as Ronald Reagan’s, though it trails the market gains under Bill Clinton and Barack Obama.
They all won reelection, but the stock market is far from a perfect predictor of electoral success. As uncomfortable as it might be for Trump, let’s take a look at the Bushes.
At this point in George H.W. Bush’s presidency, the stock market was up about as much (close to 30 percent) as Trump’s is now. Bush’s approval rating in the summer of 1991 was in the 70s, still carrying a post–Gulf War sheen. Many Democrats assumed Bush was unbeatable, opening the door for a lesser-known Arkansas governor to steal the nomination.
The stock market kept climbing, but so did the unemployment rate. By the time fall 1992 arrived, a mini-recession had ended and growth was picking up. But not quickly enough: Voters were struggling, and Bush lost.
His son George W. Bush, by contrast, spent basically his entire first term in negative stock market territory thanks to the dot-com bubble bursting. But by 2004, growth was accelerating and unemployment was steady between 5 and 6 percent — not the mid-7s seen under Poppy Bush. It was enough to allow Bush to sell sunny economic days to come, even as his narrow election triumph was largely contested on national security grounds.
This is not to say the stock market doesn’t matter. Trump is right to be spooked enough to tweet angrily about the “inverted yield curve” — a classic recession indicator, when the 10-year bond interest rate sinks below the two-year rate.
..Spread is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve. Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back. We will Win!
— Donald J. Trump (@realDonaldTrump) August 14, 2019
According to Gallup, about 55 percent of Americans have some stock market exposure from their retirement plans or otherwise. So while Wall Street is divorced from reality in many ways, that Dow Jones number matters a lot to more than half of the country.
It will matter even more a year from now, as we hit the home stretch of a campaign that will be drenched in negativity regardless of whom the Democrats nominate.
To keep things humming to this point, Trump has juiced the market with tax cuts, but there’s no way the Democratic House would allow a replay. Easing up on the trade war with China could please the masters of finance — see Trump’s well-received China tariff delay this week, to keep your video games from getting too pricey at Christmas. But Beijing would need to give quite a bit more before Trump could credibly declare a win.
If a global downturn really is arriving — and keep your eyes peeled for an OZY series this coming week on what to expect in the next recession — there’s not a lot Trump can do to stop it.
Except for the one solution to all our problems: Buy Greenland.