Trump Didn't Cause The Stock Market Downturn

Warning - This is going to piss half of you off and make the other half think I am a Trumper. Sorry to disappoint all of you in advance.

There's been a lot of angst and finger pointing in recent weeks about the downturn in the stock market. The easiest target, and the most vocal, has been Donald Trump. I think I've been pretty balanced with Trump over time. I said he wasn't responsible for the 2017 stock bull market, and while I've poked some fun at him here and on Twitter and derided him over the years for talking about the stock market, I really don't think we can blame him for this downturn.

You might be wondering why I think this. Well, this all started long before most Americans think it did. Yes, this downturn started way back in January, when global stocks peaked. Have a look for yourself.

You see, the deceptive part about this downturn was, in the USA, the S&P 500 kept ticking higher over the summer of 2018, while global stocks had peaked and mostly continued to flatline or move lower. But the correlation here was still 90%+. In other words, global stocks started turning south long before Donald Trump went on a series of Twitter tirades.

And that's the problem with the "Trump made the stock market crash" narrative - if he made US stocks crash then he must have also made the entire global stock market crash. Does anyone really believe the President of the USA is the main influencing factor in global stocks?

Now, I am not saying that he didn't influence it at all. I certainly think his trade deals have been silly and most of his chatter about the stock market should be halted by his advisors. But at the end of the day, the stock market is a great big place made up of tens of thousands of entities. The President of the USA might influence these entities to some degree, but he isn't causing them to operate the way they do, and in the long run, that's what really matters here.

I think we have to be careful injecting politics into our investment discussions. Deriving an investment position from a political position is, in my opinion, the easiest way to ruin a portfolio and inject behavioral biases into your portfolio.

NB - You might be wondering why I think the stock market did turn down. Honestly, I don’t know, but as I said at the beginning of last year, the high returns of recent years were unsustainable and likely to moderate in the coming years. The era of high and safe returns is over. So, why did stocks fall? Because in order for them to rise in the long term, sometimes they need to fall in the short term. That’s just how this works, and our political narratives rarely have much to do with how that all happens.

Comments

[thebellsareringing]

Honestly, I don't have any clue about what the hell you are bloviating about. Discussion is closed.

[1504661]

The USA current exists in two completely separate realities:
One where trump is an infallible god who is saving the world from itself, and another where the world gets just a little more precarious and uncertain each day forward.

If 25% of the country is convinced beyond all reason trump is doing a great job and the best president ever, then I think we are all screwed. The market may be waking up to the fact that the two narratives will never again be united. The fake news and conspiracies will continue indefinitely. Not good.

[thebellsareringing]

It's really about if one believes that members of the FBI and DJ and other deep state bureaucrats set out to frame DT for a crime or impeachable offense based on the fake dossier. I accept the facts that Donald Trump is the legitimate president of the USA.

[1504661]

Everything you know about these so-called deep state bureaucrats originates with trump. trump is telling you which conspiracy theory to believe… and you are betting your future on it.
you don't find that odd? you don't seem to believe or understand your opinion is being handed to you by someone who has only stories of conspiracies and not facts.

We can't (or apparently shouldn't) elect or convict people based on conspiracy theories. That is something communists do. not Americans. Conspiracy theories will never put America on a solid footing. Don’t put your trust in conspiracies and expect America to get better or prosper.

When your grandchildren ask you why they live in a 3rd world country, you can confess to them that you made the mistake of gambling your future and their future on the conspiracy theories of a con artist who could never do anything wrong.

[Phil in OKC]

To all the #nevertrumpers who are addicted to CNN . . . President Trump's policies have had an effect on the market, I'm convinced . . . but as an investor, I am looking long term . . . 5-10 years down the road . . . If you are a trader, then I understand your consternation . . . However, nothing that President Trump has done is unpredictable. He told the world what he was going to do if elected President. . . and he is delivering. He is taking on the root cause of problems and destructive policies that have negatively affected the United States economy and national security for decades, and he is succeeding. No other President from Jimmy Carter to Hussein Obama has even attempted to tackle these threats to U.S. national interests:
1) Open Southern Border to murderous gangs, terrorists, illegal drugs and firearms
2) Destructive trade deficits with China, Mexico, Canada, and Europe
3) Outright theft of U.S. Corporate private technological property by China
4) Insufficient steel/aluminum production in the U.S. as a national defense issue
5) Destruction of ISIS and bringing home our military from being an ungrateful world's police force

[TechVet]

1) more firearms move south than north and most of the illegal drugs 3nter thru legal ports of entry.
2) It is clear that neither Trump nor you understand trade deficits.
3) it is called theft of intellectual property and yes this is a problem. But, Trump has alienated the US allies with his cowboy go it alone policies. Together with the EU and other trading partners a stronger united front would have provided a better negotiation position. Instead Trump’s tariffs have pushed US allies and trading partners into China’s influence.
4) www.forbes.com/...
5) ISIS is far from destroyed, yet Trump is abandoning the US alliance and commitments bringing the troops home.

Trump has no long term vision for foreign policy or anything else.

[Phil in OKC]

"Cowboy" . . . hmmmm? Where have I heard that term applied before to an American President? . . . oh yeah . . . Ronaldous Magnus . . . The second greatest President in Modern history. MAGA

[TechVet]

No, it was GWB. THe President who is greatful to Trump for making him the second dumbest president ever.

cdn-images-1.medium.com/...

[pktasap]

So the USA is never going to make anything ever again? Every worker will be in the service industry? And we will export what? Food? ?????

We will seek to be dependent on China for everything?

Yep, a LIBS wet dream

[TechVet]

@pktasap

WTF are you talking about?

The claims of the US hollowed out shell of manufacturing is greatly exagerated. According to the conservative AEI Organization US manufacturing output has increased by 40% over the last 20 years. This increased output is being achieved with fewer people.
www.aei.org/...
And according to the St.Louis FRED manufacturing output is near record levels.
fred.stlouisfed.org/...

US Manufacturing is very strong; but the increased production is being accomplished with fewer laborers and more machines.

[pktasap]

Please pay attention. The comment was RE one that postulated that manufacturing in the USA was dead.
My comment was sarcasm

[1504661]

manufacturing in the USA is not dead. Trump said he would revive it.
What he may not have mentioned is that he will revive it with automation that eliminates workers and favors business owners who are 'smart' like him. I guess that trump promise was being sarcastic.

[labradoodle]

Seeing the bigger picture requires going back the end of WW2. At that time 50% of ALL economic activity in the world happened in the US. Everyone knew this was unhealthy for the world economy, so there was a deliberate effort to open the US to European and Far Eastern goods. The dollar was also set at a very high level to spur recovery efforts for a bombed out world.. I think we all agree that that policy was a good idea AT THE TIME.

Flash forward seventy years, and we now see the opposite. The US is the hollowed out shell of its former giant manufacturing presence. Now it is Detroit, Cleveland, Erie, Bethlehem, etc., that are the bombed out, depopulated remains of former prosperity. This is ENTIRELY due to those same outdated policies from 1946-48. What is needed now is some adult behavior on the part of our trading partners to all give a little and let the US recover to a more balanced trade and economic state. Unfortunately, our trading partners don't want a vibrant US, and absolutely don't want to run trade deficits for the good of the world. There is a full court 'press' on to attack Trump because the established order doesn't want change for that is a threat to their prosperity and power. All you people are doing is carrying water for the established powers. And remember this: the election of 2016 was about the rejection of ALL establishment players both in terms of Bernie Sanders on the left and Trump on the right.

Think for yourselves! Don't parrot the line that the six mega media corporations that control 95% of US media content say.

[Tom Armistead]

Looking back at the sweep of history, I see a host of hack historians who push narratives about the past that are carefully developed to support a course of action desired by those who adhere to a specific brand of ideology.

I examine it carefully, and reject much of it, to include MAGA thinking.

[Chart Rider]

@labradoodle Nice fantasy: cdn.importantmedia.org/...

[TechVet]

@labradoodle

The claims of the US hollowed out shell of manufacturing is greatly exagerated. According to the conservative AEI Organization US manufacturing output has increased by 40% over the last 20 years. This increased output is being achieved with fewer people.
www.aei.org/...

And according to the St.Louis FRED manufacturing output is near record levels.

fred.stlouisfed.org/...

The real issue being ignored is that it takes far fewer people to manufacture products than it did 10, 20, 30, 40 years ago. In fact, manufacturing employment has been declining over the last 40 years. In the 1980s manufacturing employed around 21M. This shrank to around 13M prior to the 2007/08 Great Recession. And the US is not alone in disappearing manufacturing jobs. Germany has seen the number of people employed by the manufacturing sector decrease from 35.8 percent of all jobs in 1970 to 18.5 percent in 2009.

In the 1980s it took a little over 10 man hours to make a ton of steel. In 2018 it takes about 1.5 man hours. Similar productivity improvements and reduction of employees can be found in auto manufacturing, aviation manufacturing, container manufacturing, mining, milling and machining, ...
The US is not facing a declining manufacturing base, it is facing a new industrial revolution. Similar to the First Industrial Revolution where millions of farmers and farm hands left the fields due to automation, we are now facing the movement of millions of workers away from manufacturing because to productivity improvements due to automation.
It is time the politicians quit lying to the US workers. Those manufacturing jobs are never going to return and more are going to be disappearing. The US needs to face reality and identify the areas of the economy that will require laborers as well as the skills needed for those jobs and begin training people for them as well as provide transition assistance to those that move out of manufacturing to some other occupation. The days when a high school grad or dropout could obtain a job at the local mill making $60k a year plus benefits for their manual labor are quickly disappearing.

[Chart Rider]

Trump did crash the global economy. He did it with tariffs, talk of pulling funding from the UN, NATO, emerging markets, climate change, and NASA. He did it through divisiveness and rote ignorance of global supply chains.

[TechVet]

@Matt Bernau

You forgot to mention Trump’s latest attack against US businesses and free trade as he threatens to close down the Southern border because congress will not give him taxpayer money for construction a wall he said Mexico will pay for. Since many companies’ supplies and logistics are dependent upon materials and products flowing freely between the US and Mexico Trump will impact their production lines, jobs and profits by closing the border. These types of threats create uncertainty while accomplishing nothing politically. As we all know, Mr Market hates uncertainty which is reflected in a declining market.
Bottom line, there are many reasons that can be sighted for the declining market. Trump’s irratic behavior only amplifies those reasons. Trump is his own worst enemy making a bad situation worse.

[Invest In Texas]

@TechVet , I hope he closes it. Come on down to Texas and see what it's really like. Not the bs that gets reported. Ask any Texas State Trooper where they need the most help.

[TechVet]

You really are clueless about the damage that will be done not only to the US economy but also to the Texas economy by shutting down the border. So sad.

Educate yourself by starting here:

www.dallasnews.com/...

“Mexico is our (Texas) most important trading partner by far. In 2015, Texas exported over $92 billion worth of goods to Mexico, which was more than it exported to the next 10 countries combined. Texas imports from Mexico were almost as high, and were twice as high as from China, next on the list.”

[Phil in OKC]

After eight years of free American enterprise destruction, the election of Trump was a total surprise to the market. His message of the end of enterprise destructive regulations was a breath of fresh air, and the market responded. The government is usually the worst enemy of the market and free enterprise . . . and Trump's election guaranteed the government was going to get out of the way. If the Democrats and Fake media had gone along with him, who knows how great America would be today. Instead they have fought him every inch of the way, and he has still succeeded in Making America Great Again.

[Chart Rider]

@Phil in OKC Huh? we had 8 years of a bull market, a President friendly to free trade, the stock market, science, and globalization. The Stock market and the so called free market would not exist if it weren't for the government. The government and the market are the same entity. Lusting after zero regulation results in zero growth. With no regulation, you get anarchy.

[Invest In Texas]

@Matt Bernau , you had 8 years at near zero interest rates and the largest U.S ever created. I hope the markets got a boost. Obama subsidized it.

[Invest In Texas]

@matt Bernau , you had 8 years at near zero interest rates and the largest U.S debt ever created by 1 president and exceeded the previous 3 presidents combined. I'd hope the markets got a boost. Obama subsidized it and that was a path to self destruction, not global strength or fairness.

[labradoodle]

A lot of what Trump is trying to accomplish are long term goal, such as the re-industrialization of the US and reversing the ginormous trade deficits. These are goals that take years, if not decades to achieve. The tax reform, tariffs, trade treaty reforms(NAFTA 2), and reducing military commitments, ARE ALL PART OF A BIGGER PICTURE. To understand this coherent whole, one has to have an attention span longer than the latest sound byte out of CNN.

[Rudester]

That would also imply that Trump's attention span is longer than 24 hours, something we know not to be true.

[nclandman]

Your argument rests on the flawed assumption that Trump's BIGGER PICTURE is the correct picture. Trump is a snake-oil salesman who has sold a fake vision that is at odds with reality to a lot of people who are unhappy with the current direction of history. Rather than working to improve global forces that are changing the way we live he is trying to turn back the clock. He is not even competent enough to make a strong effort at turning the world around and will soon be overwhelmed by events that he has no ability to comprehend. He is nothing more than a flash in the pan.

[pktasap]

Yeah, of course he had such a short attention span he became a multi Billionaire

[nclandman]

Live by the sword, die by the sword. If Trump claims credit when the market goes up he must also accept blame when the market goes down, regardless of whether either is true.

[pktasap]

Lets track your logic A person invents a car that is safe if correctly driven
Another drinks and drives and kills someone.
Who bears responsibility?

Trump created an environment for economic prosperity. Others are seeking by any means to wreck it.

[NotARetiree]

If trump only focused on economic policy the market wouldn't be in the position it is today. What ever happened to the infrastructure plan, and why wasn't that a priority?

[Phil in OKC]

High Yield - I believe there are certain priorities for Mr. Trump . . .
1) Shore up military spending - done
2) Lower individual/corporate taxes - done
3) Kill socialized medicine/Obamacare - partially done
4) Fund/build the wall - Democrat Senate obstruction
5) Trillion dollar Infrastructure Plan - Depends on Democrat House

[NotARetiree]

@Phil in OKC

1. On March 16, 2017 President Trump submitted his request to Congress for $639 billion in military spending—$54 billion—which represents a 10 percent increase—for FY 2018 as well as $30 billion for FY2017 which ends in September.

2. Mostly for the Rich. Tax Cuts and Jobs Act is a complete scam full unrealistic promises, such as sustained 3% or better GDP growth.

3. 70% of Americans now support Medicare-for-all

4. Funding the wall a complete waste of taxpayer money. Visa overstays account for ‘half’ of all people in the country illegally

5. Infrastructure plan: Trump has yet to produce one.

[1504661]

1 We have more than 1 trillion in past military spending unaccounted for. Before republitards cry socialism over all those pennies to the poor, maybe they should get busy locating all those missing dollars that have been diverted to "special interests".

2 We are just starting to see the 'scam of a tax plan' unravel.
The USA still has not had lasting tax reform, both parties know it.

3 All Americans are being held hostage by health care special interests at the benefit of the top 1% and republitards dont seem to care. maybe we should make them happy and just let everyone with a pre-existing condition die.

4 A $5billion dollar wall will always be ineffective as long as ladders and tunnels exist. The wall idea is nothing but a distraction; a staged political theater because neither party wants to address immigration reform - the only true solution here.

5 He has no plan because no reputable infrastructure companies want to get involved in his kick back schemes. Instead of seeing an infrastructure plan, wait for the dotard to try and sell us on the idea of privatizing/selling off American bridges, highways and other assets, so we can all pay more taxes to him and those he chooses to build and control the infrastructure. Less government control of infrastructure means more toll bridge profits for him and his oligarch friends.

[Retire Junkie]

I have to disagree with the author. We were back around the January highs and that is when the effect of the tariffs have started to been felt, PLUS the Trump Shutdown (his own party is saying he shutdown the gov't for no good reason) PLUS him or rumors of him wanting to fire Powell. Powell and the Fed have since walked back their rate hike talk (which is appropriate imo).

If tariff and trade issues cleared up, plus budget deal plus confirmation that Powell is his guy the market could make new highs before the next recession.

[pktasap]

A Market meltdown? Look no further than the MSM and the November election that put the LIB Dems in power + the Trump derangement syndrome to create so much chaos that the economy will start to crack.

For LIBS and the MSM it’s the politics of destruction at any cost to recapture DC.
Individual investors have no chance

[labradoodle]

pktasap,
You make a good point. The market never lies, b/c it is what it is. We hit an new all time high BEFORE the November election and have entered a bear market after the Dems got a hold of the house. By itself, this is coincident, but when we go back to business friendly Trump winning in 2016, we had quite a bull run. The market knows what's good for the market.

[Rudester]

The market thrives on predictability and that is something that Trump is unable to provide. Everyday there is a –largely self-manufactured– crisis and tweeter storm. Maybe he should recuse himself and stop tweeting.

[ghirt]

You are most likely correct in your analysis but we all know the market doesn’t like uncertainty and chaos and you have to admit the Trump is good at increasing the level of uncertainty and he loves chaos. So I have to give him some credit for the increased volatility.

[Phil in OKC]

ghirt . . . don't think I am trying to pick on you personally. There were plenty of other poster who would have provided the basis of my comments, but your's was short and sweet and to the point . . . "uncertainty" and "chaos" were two words you used to describe the Presidency of Mr. Trump. I see it differently, and I think I will get many "like" thumbs up from the readers of this thread to prove many agree with my viewpoint (for what that's worth! ha ha) . . . President Trump is the first President in my lifetime who says exactly what he means and actually accomplishes what he says he is going to do. Zero "uncertainty" with Mr. Trump. He fully outlined, in his campaign, what he was going to do, and he is doing it. As for creating "chaos . . ." it is the Fake Media (CNN, etc) who is creating "chaos" in the minds of America's snowflakes.

[Invest In Texas]

@Phil in OKC , Swamp creatures still lurk and frighten the passives. Trump isn't interested in the swamp and Obama's path to socialism has been squashed.

[labradoodle]

Phil,
To echo what you said, just look at what Trump did with oil. He wanted oil prices down going into the election, and oil went down until after the election. Like him or loathe him, we must listen to him carefully for the sake of our portfolio b/c he is effective in what he says and does. Wall Street does, I can assure you. Presumably so do foreign nations... now. That is what strength looks like, not weakness.

[wkl]

I think we knew that once the Fed started to raise the Feds fund rate, and reduce their balance sheet, the days of free money were over. I can't help from believing that this is just this markets version of having their taper tantrum. Once the traders realize the appealing valuations, and the hordes of cash that have been left in the wake of the sell off and no place to deploy it, every pundit will be back in front of the cameras telling us how cheap this market is.

[nestor7]

Ah yes, the never ending need to blame someone or something if things aren't going as you expected. Turn off the news and the media and ignore that nonsense. If any of these experts, present author excluded, knew how the world and the economy really worked, they would be ultra rich and in no need of having a fake job. Since I like the volatility instead of the brain dead bullishness which never plans for reality, I find these times very interesting.

[Mathematical Investor]

CNN, NBC, and MSNBC regularly trots out the 28 year olds w/ little real-life experience to promote the doom and gloom.

[Invest In Texas]

@Mathematical Investor lots of clueless millennials who can speak eloquently and just spout more noise and point fingers in the wrong direction. I wonder if those media outlets really know what their demographics are?

[pktasap]

The MSM could care less what the demographics are.

It's anti America and Anti Trump 24/7, 365

[knoc]

I agree that Trump is not the main market mover, but his actions have certainly had major effects. The tax cut boom was one. The tariffs and tariff talk adding to market has is another.

[csymalla]

He is his own worst enemy. He sets false expectations, such as long term growth above 4%. He simply is not trust worthy and extremely unpredictable.

[Orion Pax Roosevelt]

So he only influences the markets when they go up and not when they go down? Can't have it both ways. He owns this mess at the end.

[labradoodle]

Orion,
Or the Fed does...

[Orion Pax Roosevelt]

That is simply the new narrative the Trump cult is trying to spin. The Fed does not cause companies to miss earnings or cause trade to slow. Trade Wars do thst.

[micachu]

No one can deny that we're in a trade war. we have been in a trade war with China for 20 years or more, ever since they started their current policies. The USA finally started really pushing back in 2018. Does the act of pushing back hurt in the short term? Absolutely! Another thing that hurts is falling way behind the curve in production capacity and businesses moving overseas due to trade policies of China, amongst other nations. So yeah, if you want to blame the short term pain on Trump for the short term pain, go ahead. Be sure you also place blame on past administration's for letting it get this bad to begin with. While you're at it, make sure give credit to Trump in the future for benefits we reap for tackling this fiasco.

Full disclosure, I didn't vote for Trump. He is the most cringeworthy POTUS we've had since Carter.

[frogmaier]

markets crash when there are more sellers than buyers.
WHY they sell is due to SENTIMENT which may also trigger some of the
AI driven computer models to sell ETFs.
according to the ant Trumpers with TDS, whatever happens that is bad is
ALWAYS Trump's doing and whatever happens that is good?, well that is
rarely even mentioned on MSM and regarded as "stupid luck".
i have never seen this country as hopelessly divided as now.
i am taking SHOOTING classes just in case.

[Mathematical Investor]

Well said, frog.

Several good articles in the WSJ recently on this subject, including one today on Nancy Pelosi, who now loves Mattis (because he is anti-Trump) but in the past hated him.

[fwbuckeye]

I am not saying it's entirely his doing. The tax cuts were good for the economy but now if you are a company, you have to be wondering the following we are in Trade Wars with China, Mexico, Canada. The Fed and White House are on opposite sides of what is happening in the economy. The Government is shutdown. I worked for a defense contractor and when sequestration hit they laid off 800 out of 2500 staff. The effect of brexit may be unknown. If you are a business would you spend money in this environment? Federal government is one of the largest employers/sources of funding for many areas. It's a ripple effect, state universities, defense contractors all have effects. If the economy is a car then the federal goverment is one of the 4 wheels and it stopped moving. Trump may shutdown the southern border couple all that with this has been a largest economic expansion ever (since 2008) and we are due for something. I moved into cash. I mean if the largest producer (China), largest consumer (US) are fighting and the other large trading partner of both (Europe is facing a major crisis (brexit)) that's not good for large multi-national companies. It's probably good news for smallish US, Chinese and European companies who can make some money.

[Mathematical Investor]

Investors need to think long term, not based upon relatively short term factors (such as a 4-year or 8-year presidential terms).