This week in Trumponomics: Grasping at stocks

·Senior Columnist

27 November 2020 at 11:06 am·4-min read

President Trump wants credit for the frothy stock market. But don’t pester him about the parts of the economy that are still underwater.

When the Dow Jones Industrial Average (^DJI) crossed 30,000 for the first time on Nov. 24, Trump showed up before reporters to take credit. “The stock market’s just broken 30,000,” Trump declared in the White House briefing room. “Never been broken, that number. That’s a sacred number, 30,000, and nobody thought they’d ever see it.” Trump left after roughly a minute, and didn’t take questions.

As usual, Trump’s exaggerating. There’s nothing sacred about 30,000, or any index number. And since stocks go up more than they go down, investors fully expected the Dow would reach 30,000, just as they think it will hit 40,000 some day.

With seven weeks left in office, Trump is using his expiring lease on the national stage to try to burnish what is sure to be a tattered legacy. But the stock market, which prices in the future, has moved past the Trump presidency. Trump deserves some credit for plowing government resources into coronavirus vaccine development, one reason stocks are buoyant. But U.S. funding isn’t the only game in town, and private-sector vaccine work is just as important. Pfizer (PFE) is developing its vaccine with no upfront government funding, and is using technology developed by German firm BioNTech (BNTX).

Trump, meanwhile, has had nothing to say since the Nov. 3 election about surging numbers of coronavirus cases and the stagnation or even reversal of the economic recovery that seems to be developing as a result. The number of people filing for first-time unemployment insurance has risen for the last two weeks and remains about four times higher than before the pandemic exploded in March. “Unfortunately, it seems that underlying payroll growth slowed sharply in November,” Capital Economics reported on November 25.

So-called high-frequency indicators, such as smartphone mobility data and restaurant reservations booked online, show sharp declines in people going out, especially to restaurants. Food-bank lines wind for blocks in some areas, as the portion of Americans saying they lack adequate food approaches record levels. Much worse seems to lie ahead, as two federal programs providing enhanced unemployment benefits expire on Dec. 31. More than 13 million Americans receive those benefits, and Congress seems in no hurry to renew them or provide other stimulus most economists think is still needed.

There are a few things going right. Super-low interest rates are pushing home values up while also fueling a buying surge. And near-record stock values indicate that investors see the economy emerging from the COVID-19 ward at some point in 2021. But the vast dichotomy between depressed America and surviving America is almost a hazard in itself, since the investor class—like Trump—can persuade itself everything must be fine if stocks are rollicking. Asset-lite Americans may once again find they are the forgotten men and women of America Trump promised to rescue.

This week’s Trump-o-meter reads FAILING, the second lowest rating, because record stocks are sending a false signal about what’s happening in the real economy.

When Trump won the election in 2016, stocks went on a tear, because investors anticipated lower taxes and less regulation under incoming President Trump. That surge in stocks had nothing to do with the outgoing incumbent, Barack Obama.

The analogy to 2020 is imperfect, because the pandemic has distorted market signals. But the market is still pricing in the Biden presidency and discounting Trump’s, which is done making policy. Investors came to terms with a Biden presidency well before the election, figuring it would be more orderly than Trump’s, with market-unfriendly moves such as sharp tax hikes a long shot. Drugmakers, meanwhile, would have developed coronavirus vaccines with or without the Trump administration’s “Operation Warp Speed.” Plus, the Federal Reserve has done more to prop up stock values than anything else, and the Fed would have done this regardless of who was president or what his policies were.

It’s arguably easier to use government policy to inflate asset values than it is to put all the people who have lost jobs back to work. The job market has been recovering since May, but we’re still 10 million jobs below where we were in February. Trump probably won’t want to talk about that for the rest of his presidency. But he’ll always have the Dow.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

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