Editor: Draco Copper | Tactical Investor
Trump on Stock Market: The Don’t Tweets Move Markets?
Updated August 2023
“It’s always best to discuss such concepts within a historical backdrop because learning from history prevents repeating mistakes and vividly illustrates our words and actions in real-time.”
According to a recent Gallup poll, Americans reported substantially higher levels of satisfaction with the country’s economy under President Donald Trump than they felt under former President Barack Obama a year ago. The poll found that 58 per cent of Americans feel optimistic about the state of the nation’s economy, up 12 points from last year’s 46 per cent. This increased satisfaction with the economy is likely related to consistent reports of improved economic indicators over the past year under President Trump, including employment, GDP growth, consumer spending and the stock market.
Trump on Stock Market: One Year of Economic Growth
It has been just over one year since Donald Trump was president and took office promising to boost economic growth. In that short time, the U.S. stock market has seen steady gains, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all reaching record highs. Many analysts attribute this bull market at least partially to pro-business policies from the Trump administration, like tax cuts and reduced regulations.
President Trump oversaw a booming stock market and rising consumer confidence in his first year in office. The Dow Jones closed above 26,000 for the first time in January 2018 and broke through 26,500 by the end of the year. Indexes like the S&P 500 and Nasdaq also saw double-digit percentage gains over 2017. This growth has continued into early 2019, with the Dow up over 7% since the beginning of the new year.
Trump on Stock Market: Consumer Optimism and Business Investment
Rising stock prices under Trump have been accompanied by growing consumer optimism and business investment. Consumer confidence indexes from The Conference Board and the University of Michigan regularly reached highs not seen since the late 1990s or early 2000s during 2017 and 2018. Retail sales also increased substantially, with consumers feeling more optimistic about the economy.
At the same time, lower corporate tax rates and reduced regulations have encouraged businesses to invest more. Capital expenditures by companies in areas like factories, machinery and technology have risen sharply. Many corporations have also used tax savings to raise employee wages and spend more on hiring, training and benefits. This combination of solid consumer spending, business investment and job creation has supported steady economic growth and record-low unemployment during Trump’s presidency.
Trump on Stock Market: Outlook Under New Policies
Most economists expect the U.S. economic expansion to continue into 2020 and beyond if current pro-growth policies are maintained. The non-partisan Congressional Budget Office forecasts real GDP will increase an average of 3.2% in the next two years. Sustained job creation pushing unemployment lower, wage gains outstripping inflation, low-interest rates and tax cuts still boosting business investment would likely keep fueling household spending and corporate profits.
However, some risks remain from potential trade disputes, higher borrowing costs, or political uncertainty. The outcome of negotiations with China and other key trading partners could impact markets. Further Federal Reserve rate hikes may also slow growth more than anticipated if they constrain business and consumer activity. Overall, if President Trump can avoid major setbacks and keep pro-business initiatives on track, most signs point to the stock market rally and economic boom continuing throughout his presidency.
Trump on Stock Market: The Don’t Tweets Move Markets?
Several studies have attempted to measure the effect of Donald Trump’s tweets on stock market movements. While it’s challenging to isolate tweets as the only factor affecting markets on a given day, some research has found small but statistically significant impacts:
– A 2018 National Bureau of Economic Research study analyzed Trump’s tweets between 2015 and 2017. It found that tweets mentioning specific companies tended to negatively impact the stock price of those companies within a few hours. However, the effects were small, usually less than 1% change.
– A 2019 Quarterly Journal of Economics study looked at the relationship between Trump’s tweets and daily stock market returns. It found that days with more negative tweets correlated with slightly lower stock returns. Days with more positive tweets did not consistently correlate with higher returns. Again, the effects were minor.
– Other studies have found small positive impacts from Trump’s more generally positive tweets about the economy or markets. But the effects are fleeting, often disappearing within a day.
So, in summary, while Trump’s tweets seem capable of moving markets modestly in the short term, the impacts are minor and temporary. The market’s overall direction on a given day is influenced more strongly by economic data, corporate earnings, interest rates, and other fundamental factors than any single tweet. Trump’s tweets may reflect or amplify existing sentiment but rarely cause major sustained moves alone. Let me know if you need any clarification or have additional questions!
Trump and the Stock Market: Does the Don Influence Markets?
The stock market rallied significantly following Donald Trump’s election as President in November 2016, with the Dow Jones Industrial Average rising over 5,000 points since Election Day. Investors were optimistic that Trump’s plans for tax cuts, reduced regulations, and infrastructure spending could boost corporate profits and stimulate the economy. Some specific points:
– The S&P 500 stock index gained over 25% in the year following Trump’s election, one of the most vital years for the stock market in decades.
– Certain sectors like financials, industrials, and materials expected to benefit most from Trump’s policies significantly outperformed the broader market.
– However, stocks have also seen more volatility during Trump’s term. The market declined sharply several times when trade tensions or fears of a policy rollback emerged.
– Studies have found the stock market tends to rise during a president’s first year in office, but then performance regresses to the mean. It remains to be seen if stocks can continue outpacing broader trends.
– Individual Trump tweets have sometimes moved markets, like when he criticized Amazon and its effect on the Postal Service, causing Amazon’s stock to drop.
In summary, the stock market rallied strongly on expectations of Trump’s agenda but may have gotten ahead of actual policy achievements. His unconventional style has also sometimes introduced more uncertainty and volatility into markets. Investor sentiment remains closely tied to developments in trade and fiscal policy.
