Economist Noah Smith says the blog post I’m about to write is full of crap:
The Fundamental Fallacy of Pop Economics (which I get to name, because this is my blog and I can do whatever I want, mwahahaha) is the idea that the President controls economic outcomes [Noah Smith, “The Fundamental Fallacy of Pop Economics,” Noahpinion, 2016.12.24].
If Presidents don’t control economic outcomes, Presidents-Elect certainly can’t. That’s all we should need to laugh at Donald Trump’s holiday effort to take credit for the stock market rally.
But let’s climb some numbers, because, like Black Elk Peak, they are there (not to mention not as tall as we think).
In 2016, the NASDAQ was up 6.62%, the S&P 8.63%, and the Dow 12.58%, not far from historical average annual increases. The S&P grew every year under President Barack Obama at an average annual rate of 14.3%, making up for the ground President George W. Bush lost with his double-recession negative S&P annual rate of –0.67%. Since 1928, Democratic Presidents saw average S&P growth of 14.42%. Over the same period, Republican Presidents have coincided with 7.83% growth in the S&P.
Stock gains since November 8 are mostly in financial stocks. If those gains have anything to do with President-Elect Trump and his frothing Congress, its the deregulatory hopes of corrupt Wall Street raiders:
Instead, this recent rally is rooted mostly in corruption — now and in the future. And a rally built on corruption is bound to fail. Here’s why:
Financial stocks are responsible for much of the U.S. market’s recent move, and the rally in financials is rooted in hopes for government deregulation of the industry. Financial stocks represent about a third of the S&P and are up around 17% since the election. Take them out and there is no rally, Trump or otherwise.
…the enthusiasm for financials is more about prospects for repeal of the Dodd-Frank bank reform bill, as well as the Obama administration fiduciary rule that requires financial advisers, brokers, and asset managers to put clients’ financial interests ahead of their own.
…The market is usually one of many things that makes you, to borrow Trump’s Twitter wording, hopeful to be American, because it’s typically a monument to the creativity of our Elon Musks and Steve Jobses. Right now, something else is happening. It’s ugly, it’s cynical — and it won’t work [Tim Mullaney, “U.S. Stocks Riding a Bull Market in Corruption,” MarketWatch, 2017.01.04].
Now I get it: bull market refers to the bull—- artists looking to fleece us again.
Tangentially Related: Maybe Presidents and Presidents-Elect don’t control economic outcomes, but a President-Elect can nudge stock prices with his Tweets… briefly—Lockheed Martin has mostly erased whatever Trump did to its stock on December 12; Boeing is up 4.2% since December 5, the day before Trump’s Air Force One tantrum-Tweet. Don’t try cashing in on Trump’s outbursts, though—Skynet will beat you to it every time:
“There are people diligently working to create algorithms for Trump’s tweets, and if he continues to increase the size of the data set then we’ll likely see full automation sooner than later,” Zachary David, a senior analyst at KOR Group, a consulting firm told Politico last month.
…How fast are the bots? This Slate article, which quotes, an unnamed options trader, suggests that it takes a matter of moments for the stock market to react to news on Internet. “The speed is unbelievable. They’re buying everything within like 3 seconds of it coming out, which is not possible for a human,” the trader told Slate. Trading robots can react to other information — like trading orders that appear at stock exchanges — even faster, within millionths of a second [Ian Salisbury, “Can You Make Money from Donald Trump’s Tweets?” Money, 2017.01.03].
Of course, if Trump is a robot, and he’s talking to stock robots, we’re doomed. Or maybe he’s just building the robots….