Donald Trump cares a lot about the stock market
During the recent stock market correction, one person has been notably silent on the topic of what is happening in financial markets — President Donald Trump.
But investors should not take this as a sign that Trump has shifted his focus away from financial markets or that the administration no longer sees the stock market as a report card for its economic programs.
Over the holiday weekend, The Wall Street Journal ran a detailed story outlining the apparent displeasure Trump has expressed with his Treasury Secretary, Steven Mnuchin, over the recent market volatility and the job being done by Federal Reserve Chair Jerome Powell.
Trump’s displeasure with Powell, of course, is well known at this point — Trump would prefer the Fed not be raising rates and has said he “maybe” regrets nominating Powell to the post, among other complaints.
Part of Trump’s tension with Mnuchin remains over trade, with Trump reportedly admonishing Mnuchin over the suggestion that Mnuchin and Trump have a unified strategy on trade.
But as The Journal reports, Trump has now sought to peg the market’s volatility on Mnuchin. And while Trump’s barbs at Powell have been seen by some as the President’s effort to set up a “fall guy” for a potential downturn in the economy, Trump shifting his focus to the Treasury Secretary suggests that it won’t be just one person who gets blamed for a bad market or bad economy: if it lasts, everyone is going down with that ship.
No matter how much or how little friction there is between the White House, the Treasury, and the Federal Reserve, what investors ought to be taking away from reports suggesting discord from the administration’s financial arms is that a protracted downturn in markets or an outright decline in economic growth will not come and go without changes.
And while investors right now are sorting out whether the market’s recent behavior is telling us something bad about the U.S. economy, a risk that has been scarcely discussed is how Trump might react should a poor economic period come to pass. The answer, it would seem, is not well.
How markets would react if Trump moved to remove Powell or Mnuchin, however, is anybody’s guess. And whether investors could prepare themselves to capitalize on a market move in the event of either personnel move happening further complicates any positioning investors could adopt to protect against this risk.
But in a market environment where worries about a global growth slowdown and a policy error from the Fed are top of mind, don’t forget about the unpredictability of an unconventional presidential administration. Because for all of the seeming political chaos that has ensued during Trump’s time in office, the world of business, markets, and finance has had a pretty conventional experience with this particular Republican administration. The current market environment could be a major gut check for that reality.
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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
