The Trump Virus in the Markets
He calls it the Chinese Virus. Really Chinese. So Bad. But have Trump’s policies had more of an impact on the markets than it seems?
Much of the recent uncertainty in the markets has been blamed on Coronavirus, but Trump’s dithering and characteristic attempts to gaslight the global public have not improved optimism.
Just weeks ago he was denying the existence of the pandemic — he said there would be 0 US cases by mid-April — and now he’s adamant that he has been warning against it all along.
In an interview with Democracy Now, Nobel Prize winning Economist Joe Stiglitz has said that the stock markets don’t trust the Trump administration to deal with the crisis effectively.
“They know that the president is incompetent”, he said. “They know that this is beyond the capabilities of the administration. We’ve seen this incompetence in the areas of testing and the response to the coronavirus”.
He explained that Trump’s earlier policies of large tax cuts to corporations since his inauguration in 2017 made stockbrokers very optimistic. Markets rallied.
“They focused on the short term, not the long term, not the risks that Trump represented to our economy, to our world”. This was the so-called Trump Bump.
“Now that optimism has turned, has flipped into extreme pessimism”.
And the Trump Bump has been almost completely wiped out. The Dow Jones has fallen 30% since its peak in mid-February.
While Trump’s administration has seen the stock market rally, we are now seeing a harsher crash than necessary. The artificial optimism from Trump’s presidency has created more volatile markets, meaning larger peaks but also deeper crashes.
The Trump administration has suggested a payroll tax cut. That will leave deep holes in the Social Security budget, which doesn’t fill investors with optimism. Workers won’t go out and spend their savings in the middle of a stock market crash. That isn’t how economics works, Mr. Trump.
His particular brand of politics and disinformation, which is normally effective in manipulating voters and the media, is failing to positively impact global economies and is exacerbating the crash.
The impact of the crash, like the impact of the peak, is global. Funds have flown into government bonds over the past few days, lowering interest rates to near 0%. Since then, investors have sought cash.
In London, the GBP/EUR exchange rate dropped to its lowest level since 2008 last night, as fund managers seek a safe currency in which to wait out the crash. Amongst Brexit uncertainty, GBP is a risky choice. GBP/USD is near record low.
Trump’s tax cuts and increased spending bubble was bound to burst, and the Coronavirus has come along and popped it.
No wonder he’s blaming China.
