President Trump spent the first year of his presidency singing the praises of the stock market, which rose precipitously in anticipation of GOP tax cuts and business-friendly deregulation.
Nearly seven months into 2018, Trump barely mentions the markets anymore. The S&P 500, considered one of the best representations of the U.S. stock market, closed at 2,718 on Friday.
Even as good economic news continues to make headlines, the stock markets have become volatile. The S&P is hovering at the same level it was in late December and early January.
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During his first full year in office, Trump tweeted the phrase “stock market” 46 times, almost once a week.
Since Jan. 26, when the market topped out at 2,872 and headed into a correction, Trump has only tweeted about it twice.One of those tweets decried the seeming incongruence between the market and the steady stream of good economic news.
“In the 'old days,' when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!” he lamented.
The switch makes sense.
In his first year in office, Trump had plenty to brag about when it came to stock performance.
The S&P 500 rose 23.9 percent from Jan. 20, 2017 to Jan. 20, 2018. Of the last eight presidents, only former President Obama had seen faster growth in his first year in office, at 30 percent, according to data from Microtrends.
Just a few months later, the S&P’s performance under Trump has fallen but is up 20 percent since his inauguration. That’s behind the 20.4 percent growth seen by former President George H. W. Bush over the same time period, the 24.8 under Obama and the 39.8 under former President Ford.
It’s possible the markets have stalled because the big market rally at the end of 2016 and for most of 2017 was an early indicator of sorts of the growing economy traders expected from tax cuts under Trump.
But Trump’s move to impose tariffs on foreign steel and aluminum and goods from China has also rattled Wall Street, where worries about a growing trade war are common.
“The markets were lulled into a sense of complacency in the first year of the president’s term,” said Michael Cembalest, chairman of market and investment strategy for J.P. Morgan Asset Management. “This year you’re getting the other side of Trumpism.”
Despite booming corporate profits and high consumer confidence, he said, Trump’s trade policy is putting a drag on stocks.
Trade wars, talks of withdrawing from institutions such as the World Trade Organization, blowing up at allies in the Group of Seven and overseeing a revolving door of advisers make markets jittery.
There are also some things that are out of Trump’s control — most notably the Federal Reserve’s plans to raise interest rates.
“If all these things are good and we still have this increasingly volatile market, who gets the blame?” said Cembalest. “I think it’s fair to say that 50 percent of it is a consequence of the expectations that the Fed’s going to normalize interest rates, and the other 50 percent is the White House, pure and simple. They are snatching defeat from the jaws of victory.”
Another element is the fact that markets are driven by expectations, meaning that traders’ views of what’s around the corner can be just as important as what’s happening right now.
“That’s the tough part about the market, is that it should always be a very forward-looking mechanism. You’re always looking at the next big thing,” said Amanda Agati, the co-chief investment strategist at PNC Financial Services Group.
“The hype and anticipation of the tax package was great for that market. That’s in the rear-view mirror now, so the new question is what that next big catalyst will be, what’s the next big needle mover?” she continued.
Market watchers also realize that the current economic expansion cannot go on forever. Viewed from the beginning of his term, Trump has enjoyed a robust market and unemployment that, at 3.8 percent, is at a nearly two-decade low.
While nobody expects a recession in the coming year, surveys show analysts expect one by the 2020 presidential elections.
“We’re another year into a very long cycle of growing, and the clock is ticking,” Agati noted.
Then there’s the fact that 2018 itself is an election year, and nobody is quite sure how to anticipate the results of November midterms, nor how they would affect policy.
“I think the market relative to last year is struggling with the potential outcome. Could there be a shift in power? And what does that mean for policy?” said Agati.
Some analysts warned that Trump’s early focus on the stock market could backfire if the mood in the market changes. One year’s stock performance has little bearing on the next year.
Former Presidents Clinton and Reagan, who saw substantial stock gains in their two terms in office, both oversaw anemic stock performances early in their first terms.
But others think there’s little danger in Trump’s changing messaging.
Doug Heye, the former communications director of the Republican National Committee, says that Trump has good reason to believe in his ability to change the conversation when it suits him.
“If we further remain distracted by the other good economic news, then the fact that he may have stopped talking about the Dow will not play much of a role in the elections,” he said.
Indeed, Trump has turned his attention to other favorable economic indicators, such as the unemployment rate.
After avoiding the word “unemployment” in his tweets in the first five months of his presidency, Trump has gone on to mention it 35 times since.