Perhaps Trump's Craziest Action

Trump seems to have adopted the Dow Jones Industrial Average as his primary metric of success.   Talk about buying at the top.  Not sure I would tie my performance appraisal to a market where the Shiller PE is over 30.

  • marque2

    This is kind of selective hatred. What president hasn't brought up good stock markets and claimed it was their doing.

  • I think the point is that he did it early in his term, and at a time when market indices seem unreasonably high.
    By taking the Dow as his metric of success now, Trump sets himself up for failure according to the metric he has chosen, when the financial markets inevitably show a large downturn sometime in the next few years.

  • ErikTheRed

    I've always found the notion that massive amounts of money piling into blue-chip stocks to be more a cause for concern than celebration. What this is saying is that there is more demand for capital being shelved in "safe" places than being risked on new ventures. Ordinarily you'd see this money go into cash and bonds, but with effective interest rates at arguably negative levels, it goes into equities. Of course Wall Street loves it - anything that increases volatility makes more money for them.

  • mx

    Presidents have historically been cautious about making a lot of statements about the performance of the stock market. While they'll certainly take some credit for good times, and will allow their surrogates to boast about it on their behalf, crowing about marked indices from the briefing room used to be frowned upon, if for no other reason than the fact that most Presidents have been capable of looking ahead a short distance into the future. If you spend so much time taking credit when the market is up, you give the impression that the White House is directly responsible for the market, and more importantly, that you're responsible when it goes down too.

  • bobby_b

    It's not totally without merit. If you look at the amount of wealth coming in to the market from foreign sources, it's a valid measure of the relative national confidence levels.

  • Nehemiah

    Presidents tend to have less impact on economic performance than the public gives the credit/blame for. However, I would say that Trump's election itself removed some of the psychological factors that were weighing on the market. One such factor was the temporary slowdown of our leftward drift deeper into socialism. Another factor was the belief that regulatory relief was on the way, a belief that has been rewarded.

    Unfortunately, the market has also been buoyed by the assumption that the more onerous aspects of Obamacare would be repealed and that the tax code would be overhauled. Key aspects of which are lower corporate tax rates and repatriating US profits being held oversees. If Congress doesn't get either of these done this session they will be punished in the 2018 midterms, particularly if they raise the debt ceiling without some type of budget reduction built in.

    If they get either done they will likely improve their numbers in the House and Senate. It would probably also put Trump back in the Whitehouse if he decides to run again.

    However, if they do not reform healthcare and/or the tax code the stock market will adjust to that reality which could slow economic activity and set up democrat victories in 2018 & 2020. Can you fell the Bernie?

  • Griz Hebert

    Trumph is performance art.

  • progenitive

    The graph at the link is interesting, in that the mean and median are both about 16, historically, but the only time since 1990 that we've been that low is 2009.

    https://uploads.disquscdn.com/images/f476f9910b62816eb40aebee18fc48819f083b6f06fb2c2aae98f0fb9e1936da.png

    So were prices rational in the spring of 2009, when S&P500 was about 50% off its peak, and fear was maximal? Possibly, which is scary. But if so, then for the entire meaty middle of my investing life, about 1995 till now, we haven't seen a "normal" market? What should we do, stay in cash till we see <16? Not trying to be snarky; I really don't know. I sense that we're getting into bubble territory as well. But I also sense that this CAPE ratio isn't all that useful.

  • Jonathan Osepchuk

    It's good to see interest rates mentioned in this context. It surprises me to see intelligent people having protracted discussions of PE levels without reference to interest rates.