Trump’s latest 2020 campaign ploy is a threat that the stock market will crash if he’s not elected, despite the fact that a stock market crash and a global recession are exactly what investors are fearing right now--and precisely because of the president’s trade war. At a time when fear has overtaken greed for investors, it’s an unusual campaign gimmick--but everyone’s certainly grown used to the unusual by this time.
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The DOW may have done well enough under Trump, but it hasn’t done as well as it did under Barack Obama, and the fear of a global recession as a result of the trade war is what’s pushing the fear and greed index into the red.
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The S&P 500 managed to hit a record in May; but the trade war ruined that.
The DOW peaked last October.
But this administration likes to bank on assertions that cannot be proven in any shape or form, such as Trump’s claim that the market would be down another 10,000 points had a Democrat been elected in 2016.
Related: Trade War Pushes Ultra-Rich Back Into Cash
And as far as the gloomy situation with the market right now, Trump lays blame squarely on the Fed, not on the trade war.
Trump’s inauguration and the tax reforms sent the markets soaring, but since then, greed has turned into fear in a rather definitive way.
But Trump’s campaign ploy of calling a stock market crash if not re-elected isn’t for a small group of economists or experts--it’s for a masses, who are prone to buy anything with enough bells and whistles on it.
Stock values in this day and age are far from being an accurate barometer of American economic performance, but that doesn’t matter: The average voter Trump is targeting with this tweet is now frantically looking at his or her 401K.
It’s not about who’s right or wrong, or what the data shows: It’s about who can get the message across in the most confidently colorful way. That’s Trump, whose presidency has redefined truth and fact irrevocably.
Likewise, it makes no difference that the S&P 500 grew by 56.4 percent under Obama, and only 21.4 percent under Trump. The masses aren’t interested in fact-checking by the “elite”.
Speaking to Fortune, Max Gokhman, head of asset allocation at Pacific Life Fund Advisors, said that “[...] should all the announced tariffs be fully enacted, the U.S. economy will face a $230 billion tax. This net tax increase would likely deal a fatal blow to the aging expansion, where not even the most skilled central banker could resuscitate it”.
Two things that will move the stock market this month are the Fed’s monetary policy decision coming out on Wednesday and the G-20 meeting at the end of this month, where sentiments are entirely up for grabs as to whether the U.S. and China will reach any kind of trade agreement.
Last week, Trump again went on the warpath against Fed Chairman Jerome Powell, saying that “if we had somebody different” in charge boh the economy and the stock market would be doing much better. Trump went as far as to predict a GDP of 1.5 percentage points higher and a stock market 10,000 points higher.
In a note to investors last week, Citigroup noted that policy uncertainty is a persistent threat to markets, and the most likely immediate outcome of the trade war is mounting tensions. They predict even more drastic “shock-and-awe” strategies from Trump.
“Applying a game theory lens to the problem, one could argue that President Trump is likely to continue to take a hard line,” the analysts said, predicting a situation in which stocks are driven into a bear market, with a drop of at least 20 percent.
So, will the stock market face an “epic” crash if a Democrat is elected? No. It’s more likely to face an epic crash if Trump continues with a trade war that risks what many economists fear will be a global recession to beat all recessions.
Does it matter? No. Not when the mob rules.
By Fred Dunkley for Safehaven.com
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