Trump's powers fall short in market
WASHINGTON — For months, President Donald Trump boasted about having steered the U.S. stock markets to record high after record high.
What a difference a few days can make.
The sudden cratering of stock prices, rising bond rates and fierce volatility have been a stark reminder that Trump, like his predecessors, isn’t commander in chief of the U.S. economy. Financial markets pivot on forces that owe at least as much to computerized trading programs, overseas investors and global central banks as they do to a president’s policies and force of personality.
The same investors that cheered Trump’s tax cuts and stayed calm amid the threat of a nuclear attack from North Korea are now dreading the risk of higher inflation and the prospect of rising interest rates engineered by the Federal Reserve and other central banks.
Yet beginning immediately after his 2016 election all the way through last week’s State of the Union address, the president repeatedly claimed credit for a surging stock market and increases in Americans’ retirement saving accounts. On Twitter, he declared that stocks would rise even higher once his $1.5 trillion tax cut was “totally understood and appreciated.”
Investors and the trillions of dollars they control, it turns out, have minds of their own, as shown by the stock market’s dizzyingly steep declines on Friday and Monday and the volatility that extended into Tuesday.
“This is a healthy reminder that there are risks in the market,” said Mark Doms, a senior economist at Nomura Securities. “If you invest in the stock market, there are ups and downs. We just hadn’t had too many downs recently.”
It’s not just stock prices that have been tumbling. Bond prices have been falling and interest rates have been rising on U.S. Treasurys. The result is higher loan costs, which make it more expensive for the government to borrow and more burdensome for Americans who need to take on debt to buy homes or cars or to pay for college.
In the 1990s, James Carville, an aide to President Bill Clinton, declared that the bond market, not just elected officials, had power to shape White House budget policies. The bond market, in setting federal borrowing rates, determined just how much the government could afford to borrow.
“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter,” Carville said. “But now I want to come back as the bond market. You can intimidate everybody.”
What the Trump administration may find frustrating is that markets have plunged off of relatively positive economic news. The January U.S. jobs report showed that Americans’ average hourly wages, which have lagged for years, had shot up 2.9 percent over the previous 12 months — the fastest such increase in more than eight years.
