The Stock Market and Donald Trump: “The Trump Rally”

The Stock Market and Donald Trump:
“The Trump Rally”

The US stock market has been performing exceptionally well since President Donald Trump was elected. The S&P 500 has added 2.04 trillion in market value since Trump's election last November. The US has one of the highest corporate tax rates in the world and a reduction of that would bulk up companies' bottom lines, which is the net income. Researchers at capital companies agree that the performance has been mainly due to earnings. Lower corporate tax rates have been increasing companies’ earnings. 

Donald's Tweet boasts "Highest Stock Market EVER." Some doubt whether this is true, but it is true that since Trump's election, the stock market has hit several historical highs. In February 2017, the Dow Jones closed at a record high 10 days in a row, and broke the 21k mark in early March. Again, in August, the Dow Jones rose to a record breaking high.

And the President is not quiet about it. He loves taking credit for this performance and boasts that, “highest stock market in history… The reason our stock market is so successful is because of me.” On Air Force One on his way to Asia at the beginning of this November, Trump told reporters, “The reason our stock market is so successful is because of me. I’ve always been great with money, I’ve always been great with jobs, that’s what I do. And I’ve done it well, I’ve done it really well, much better than people understand and they understand I’ve done well.

So why is it that the Stock Market and Donald Trump are such good friends?

First, the Trump Cabinet promises things Wall Street likes. Trump’s agenda, like infrastructure investment, deregulation, and tax cuts, are strengthening the market- or at least bringing up market’s expectations. Investors are bolstered by the fact that measures like tax cuts are on the table.

Second, the Trump Cabinet have not passed policies Wall Street doesn't like. Wall street is concerned with some elements such as proposals for reducing legal immigration and raising tariffs, which economists agree are “not good things.”

Third, Trump Cabinet is well connected with firms such as Goldman Sachs. Gary Cohn, who used to be Lloyd Blankfein’s Number 2, left Goldman Sachs to go to Washington to become Trump’s economic advisor.

Currently, Trump in stock market performance behind Obama and Clinton. The first is Bill Clinton, and the second is Barack Obama. There is the concept of “Peace dividend,” which means that usually, peace-time presidents have better stock market performance than war-time ones. The top three performers, Bill Clinton, Barack Obama and Gerald Ford, were all basically peacetime presidents.