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Smart Investors Disdain Trump’s Market High

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Smart Investors Disdain Trump’s Market High


Reprinted with permission from Creators.


A rich guy I know really, really dislikes Donald Trump. A member of the 1 percent, Jack (not his real name) thinks the president has sullied the country’s reputation and put democracy in danger. But I had to ask him this: “Aren’t you at least happy with the stock market?” He’s done quite well on that score, as have many investors.

“Yes,” he said, “happy in the short term, but as a long-term investor, neither happy nor optimistic.”

Formerly employed in finance, Jack sees a return to the “snake oil policies” that led to the 2008 economic meltdown. The renewed passion for deregulating Wall Street, he believes, will feed “the take-the-money-and-run attitude symptomatic of Trump’s history and the swamp he has brought with him.”

Jack regards the president’s talk about opening the money spigots to grow the economy as baloney. “Fact is, regulations notwithstanding, financial institutions are flush with money to invest and loan out,” he said.

Though Jack might personally benefit from some of the proposed tax cuts, he sees them vastly worsening budget deficits. Rising deficits would lead to higher interest rates, costing growth.

Other Wall Street sophisticates are not terribly impressed with Trump’s economic policies. Trade wars, for one, would deal a blow to the economy, bringing stock prices down with them.

Trump’s threats against the North American Free Trade Agreement are especially concerning. If NAFTA were ditched, “we’d surely see a stock market correction,” economist Allen Sinai told The Wall Street Journal.

It’s nice to watch the Dow Jones industrial average hitting record highs, but in this environment, a 1-point gain can produce a new high. In football terms, “it’s the market equivalent of 3 yards and a cloud of dust,” Scott Clemons, chief investment strategist for Brown Brothers Harriman, told Barron’s. “It’s just one slow grind upward.”

Still, the Dow has posted more than 50 highs this year. There haven’t been that many since 1995 — when Bill Clinton was president. That year, the Dow broke its record 70 times.

Speaking of stock market highs under Democrats, there were 61 in Barack Obama’s last three years in office. The early years, we recall, were spent climbing up from the flattened market he inherited from his deregulation-happy predecessor.

Kevin Hassett, co-author of a legendarily ridiculous guide for investors, “Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market,” is now Trump’s top economist. Published in 1999, “Dow 36,000” predicted that in three to five years, the Dow average, then trading at around 11,000, would triple to 36,000.

If you wait too long, the book warned, “the benefits of Dow 36,000 will pass you by.” Five years later, the Dow finished 2004 at 10,783.

When Trump named Hassett to lead his Council of Economic Advisers in April, economists quipped that it was so close to April Fools’ Day it might have been a joke.

Some less encouraging high numbers: Budget deficits are the highest they’ve been in four years. U.S. household debt — driven by home mortgages, auto loans and credit card balances — recently broke a record.

Showman Trump portrays every bit of positive economic news as evidence of his superhero powers, but inconvenient facts remain. One is that stock markets in other countries have also been hitting highs. The other is that the U.S. economy since he became president has not been all that hot.

Goldman Sachs just sent a note to clients predicting 3.9 percent annual growth in the global economy through 2020. It expects U.S. growth, on the other hand, to slow to just 1.5 percent. Trump set 3 percent as his standard for success.

Ah, so much winning.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at fharrop@gmail.com.To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators webpage at www.creators.com.


Froma Harrop

Froma Harrop’s nationally syndicated column appears in over 150 newspapers. Media Matters ranks her column 20th nationally in total readership and 14th in large newspaper concentration. Harrop has been a guest on PBS, MSNBC, Fox News and the Daily Show with Jon Stewart and is a frequent voice on NPR and talk radio stations in every time zone as well.

A Loeb Award finalist for economic commentary in 2004 and again in 2011, Harrop was also a Scripps Howard Award finalist for commentary in 2010. She has been honored by the National Society of Newspaper Columnists and the New England Associated Press News Executives Association has given her five awards.

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  1. Dominick Vila October 26, 2017

    The first thing we should remember is that the stock market rose from 7,000 points when President Obama was inaugurated in 2009 to over 18,000 points when he left office. The far right was quick to point out that such an amazing recovery, after the near collapse of our economy in 2007-08, did not mean anything. The stock market has continued to rise since Trump’s inauguration, not because he has signed meaningful legislation, but because the momentum the market enjoyed during President Obama’s tenure has not stopped, and because investors see a short term opportunity to capitalize on Trump’s deregulation agenda, and tax reform that in its present form favor corporate America and the elite. The question for many of the wealthy investors that are making millions in the stock market is how much longer will it continue to rise? Will the price to earnings ratio, and the distinct probability of a major market correction – or worse – cause the market to drop significantly within the next couple of years? One thing is certain, Trump, the man that is taking credit for the market going up, will be AWOL when it takes a nose dive.

    1. Dapper Dan October 26, 2017

      Another thing to keep in mind regarding the soaring Dow. Approximately 36 percent is foreign invested and I’m sure Russia has some investments in our Stock Market. If Russia, China or any other country wants to bring our economy and stock market down they’ve got heavy leverage. How much has been invested since the election I don’t know but the bottom line is America is beholden to other nations. So much for sloganeering America First

      1. Dominick Vila October 26, 2017

        Another facet of this issue is that the current boom is fueled in part by huge profits being realized by American companies operating overseas. Those companies are taking advantage of strong economic growth in EU member countries, China, Japan, and a few other countries to profit. A global slowdown, like the one we saw in 2008-10, will result in a dramatic drop in U.S. market holdings.

        1. Independent1 October 27, 2017

          Apparently, the ‘economy’ grew at a 3% rate the past quarter; my sense is resulting to a large degree in hundreds of thousands of Americans having to rebuild their homes after one disaster after another occurring across the nation from hurricanes, floods, wildfires and even earth quakes resulting from global warming which Trump’s policies are going to exacerbate.

          A large portion of that 3% growth has nothing to do with a truly growing economy but rather the rebuilding efforts that Americans across the nation have had to live through to recover from the devastation of one disaster after another has forced them to endure (It’s not by accident that the profits of Caterpillar were especially strong this past quarter also).

  2. Lynda Groom October 26, 2017

    What goes up must come down. True in many things in life and as history has shown certainly true in the market.

    1. Dominick Vila October 26, 2017

      I agree. One thing is certain, when the market drops, and it eventually will, Trump will quickly claim that was not his fault, and blame someone else for it.

  3. johninPCFL October 26, 2017

    The current market high continues for the same reason as the peaks during the Obama administration: ZIRP. Companies of size can borrow money at near zero interest rates, and the CEOs of the companies have pay packages that tie performance bonuses to stock price. Borrow a few billion during the year at near zero interest, certainly before your performance review, and buy stock. Values increase and you get a nice performance bonus!


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