President Donald Trump speaks on tax policy during a visit to Sheffer Corporation in Blue Ash, Ohio, on Feb. 5, 2018.Evan Vucci/The Canadian Press
As the stock market gyrates, it is teaching Donald Trump a valuable lesson: When the U.S. President fixates on a statistic, it becomes his responsibility.
For months, Mr. Trump has cited the rise in stock prices as a testament to his own success. He has boasted about the stock market more than 50 times on his Twitter feed since becoming President, hailing the "Trump Rally" as the "most explosive" in modern times and declaring that stocks would have fallen by half had his opponent been elected.
During his State of the Union address last week, Mr. Trump once again bragged about the buoyancy of markets on his watch. "The stock market has smashed one record after another," he said, which is "great news" for the retirement savings of average Americans.
So when stocks plunged and volatility soared on Monday, it was an awkward moment for the White House. The Dow Jones Industrial Average suffered its worst percentage loss since 2011 and its largest intraday point loss in history. By the close of trading on Tuesday, U.S. stocks had recaptured about half of those losses after intense swings earlier in the day.
Unlike his predecessors, Mr. Trump has seized on the stock market as a kind of scorecard for his administration. The risks of that strategy are obvious to any investor: Markets go up, but they also go down – sometimes in brutal and unpredictable ways.
Jay Carney, a former spokesperson for President Barack Obama, noted on Twitter that the previous administration never "boasted about stock market" despite a huge run-up in prices, because "1) the stock market is not the economy; and 2) if you claim the rise, you own the fall."
While Mr. Trump has not made any public remarks on the market tumble, the White House has attempted to shift the attention away from short-term fluctuations. Sarah Huckabee Sanders, Mr. Trump's press secretary, said in a statement Monday that the President's focus was on "long-term economic fundamentals, which remain exceptionally strong."
Treasury Secretary Steven Mnuchin echoed those comments on Tuesday in remarks to lawmakers. The administration is "monitoring the stock market, which is functioning very well," Mr. Mnuchin said. He described the recent moves as a normal, if significant, correction in prices. "I think the fundamentals are quite strong."
Douglas Holtz-Eakin, president of the American Action Forum and a former economic adviser to Republican John McCain, recommended that politicians avoid commenting about stock market moves in any direction.
"There is very little day-to-day connection between market valuations and the economic reality on the ground," Mr. Holtz-Eakin wrote in a blog post on Tuesday. It is "essentially impossible" to say why a particular market move occurred and "certainly risky" to tie it to a specific policy development.
Mr. Trump's focus on stock indexes is not his only statistical preoccupation. In an unusual strategy for a president, Mr. Trump uses the U.S. trade deficit as a proxy for who is winning and losing in global commerce. In Mr. Trump's view, a trade deficit with a country means that the United States is somehow getting snookered, while a trade surplus means the exchange is fair (economists take serious issue with this characterization).
Mr. Trump's emphasis on the trade gap made for another awkward moment for the administration on Tuesday. The Commerce Department released figures showing that the U.S. trade deficit widened in 2017 to US$566-billion, the largest gap since 2008 and up 12 per cent over the year.
Mr. Trump is prone to puffing up his administration's solid track record on the economy. During the State of the Union address, Mr. Trump noted proudly that 2.4 million jobs had been created since the election, although it is unclear how Mr. Trump can take credit for jobs generated before his inauguration (the actual figure for jobs created since Mr. Trump took office in January, 2017, is about 1.8 million).
In the same speech, Mr. Trump also touted a historic low in African-American unemployment. Joblessness among black Americans indeed touched a record low of 6.8 per cent in December, but Mr. Trump neglected to mention that it had been steadily declining since 2011. What's more, three days after Mr. Trump's address, the Bureau of Labor Statistics announced the updated figure for January: African-American unemployment had spiked up to 7.7 per cent.
Still, Mr. Trump's constant cheer-leading of stock-market performance and economic statistics appears to be having the desired effect on his supporters, at least for now.
Gary Marinangeli, a retiree in Pennsylvania and who voted for Mr. Trump, said that he had stopped watching political news on television, turned off by partisan bickering. He did not always agree with Mr. Trump and found him to be an "idiot" sometimes. But his support had not wavered.
"Numbers don't lie, with the stock market and everything," Mr. Marinangeli said last month. "If the numbers are good, he's doing good."
U.S. stocks rose two per cent Tuesday after swinging sharply between gains and losses throughout the session as Wall Street tries to end a global stock market plunge that has erased $4-trillion in global equity wealth.
Reuters