On Monday, in the hilarious “Trump’s Preferred ‘Confidence’ Meter Down Every Month Since He ‘Created’ It,” we noted that since Donald Trump’s April 12 interview with the Wall Street Journal in which the President said it was “partially my fault” that the dollar is too strong “because people have confidence in me,” the greenback has done nothing but slide.
In fact, it hasn’t had a winning month since he uttered those words:
Meanwhile, the stock market has of course soared on the back of still accommodative central bank policies.
And while you won’t hear much from Trump on the dollar these days, what you’ll hear plenty of is the President taking credit for stock prices. Witness this from Tuesday morning:
Stock Market could hit all-time high (again) 22,000 today. Was 18,000 only 6 months ago on Election Day. Mainstream media seldom mentions!
— Donald J. Trump (@realDonaldTrump) August 1, 2017
Of course the ultimate irony there is that the reason the stock market is so high is due at least in part to the fact that because Trump is so inept, investors are betting that the Fed can’t move too quickly to normalize their balance sheet.
This is made even more ironic by the fact that just last year, Trump said Janet Yellen should be “ashamed of herself” for the very policies that are now behind the stock rally he’s trying to take credit for.
But you know, what do you expect? It’s Trump.
For what it’s worth, here’s Cameron Crise’s take…
Friends, traders, portfolio managers, lend me your ears: I come to analyze Trump, not to bury (or praise) him. The U.S. president has dominated the media narrative like no other in recent memory, which naturally lends itself to ascribing asset-market causality to his actions/inactions/tweets/scandals, etc. The reality is that since the election, U.S. markets look much the same as their global counterparts.
- Shakespeare wrote that “the evil that men do lives after them; the good is oft interred with their bones.” These days there is a temptation to blame or credit politicians and policy-makers for market outcomes even when they have no direct responsibility for them.
- Donald Trump’s impact on U.S. business and consumer sentiment was palpable, as both surged after the election. While some of this development can be described to the political leanings of survey respondents, even the ISM (a survey based on actual activity) has surged relative to global peers.
- It’s true that U.S. equity markets have performed well over the same period, but how much of that is down to U.S. economic sentiment? After all, actual activity and inflation data have disappointed for much of this year, as has hopes for the Trump legislative agenda. At the same time, growth in the rest of the world has picked up and tail risks in Europe and China appear to have receded. Amazingly, since the U.S. election American stocks have performed almost exactly in line with global equities.
- At the same time, the Federal Reserve has raised rates three times since Trump’s election even as other major central banks (excluding the Bank of Canada) have largely maintained the status quo. However, the disappointing inflation trajectory and lack of fiscal stimulus has encouraged the market to rein in its pricing of future rate activity. Believe it or not, US Treasuries have also performed almost exactly in line with global peers since the election.
- Much of the relative performance of global bonds is down to currency movements. While it’s tempting to blame dollar weakness on Trump, the reality is that it’s much more down to disappointing U.S. inflation and positive political and economic outcomes elsewhere. It’s hard to blame the weakness of the dollar on the failure of Trump’s agenda when USD/MXN peaked the day before he took office!
- The circus at the White House makes for compelling viewing, as evidenced by the recent rise and fall of “the Mooch.” But if you want to forecast asset markets correctly, focus on the facts.