I reached out to people in the finance industry and further afield to register their opinions. Amongst our panel, we have an Economics Professor, an Options Trading Expert, a CEO of a Securities & Bankruptcy Law Firm, a Fund Manager, an Investment Strategist, and an expert Day Trader. We also have some feedback from regular investors, entrepreneurs, and even a comedian. These differing opinions provide a fascinating insight into the perception of President Trump’s influence and the generally accepted theories of investors.
We start with our experts and end with our comedian.
Financial Industry Expert Opinions
President Trump’s policies and the US stock market
Dr. Frank Shostak Associated Scholar of the Ludwig von Mises Institute
At the end of October 2018, the S&P500 closed at 2,658.69 – an increase of 20.9% from the end of November 2016 when Donald Trump was President-elect of the US.
Some commentators attribute the strong increase in the stock price index to Trump’s supposedly favorable policies towards US individuals and businesses, such as the lowering of taxes.
We suggest that the key to stock market fluctuations is changes in the money supply.
There is an average time lag of 22 months between changes in money supply and its effect on the annual growth rate of the S&P500 (see chart in research pdf). We employ in our analysis the Austrian School of Economics money supply definition.
Utilizing the lagged yearly growth rate of money supply, we are able to convert this into a proxy for the S&P500 to assess the impact of money on the stock market. In the chart below, we present the actual S&P500 against this proxy (see chart in research pdf).
There is a very good visual correlation between the actual S&P500 and its proxy. It also raises the likelihood that the strong performance of the S&P500 between November 2016 to the present period is mostly on account of past monetary pumping and has very little to do with Donald Trump’s presidency.
We also suggest that based on the lagged yearly growth rate of the money supply – which has been declining – the annual growth rate of the S&P500 is also likely to come under strong downward pressure. This also raises the risk that in absolute terms, the S&P500 could weaken visibly (see chart in research pdf).
We conclude that the strong stock market has nothing to do with Trump’s presidency. It is in response to past money growth.
Associated Scholar of the Ludwig von Mises Institute Dr. Frank Shostak owns the consulting firm Applied Austrian School Economics, which provides in-depth assessments and reports of financial markets and global economies. He also served as a professor at the University of Pretoria and the Graduate Business School at Witwatersrand University.
The Trump administration has been overall positive for the stock market.
Dr. Edgar Radjabli. Managing Partner at Apis Capital Management.
I believe that the Trump administration has been overall positive for the stock market. Now to be clear, I don’t necessarily think that his policies by themselves created positive economic conditions. But from a stock market perspective, that doesn’t really matter as the market generally trades on expectations more than reality.
The most compelling argument is that from election day in November 2016 all the way through January 2018, the market was on a consistent uptrend. This was a result of the market’s expectation of Trump’s generally pro-business policies and promises of tax cuts, which were, in fact, realized in the Tax Cut and Jobs Act of 2017.
With that said, in 2018, Trump’s presidency has shown some negative effect on the market, namely, with a protracted showdown over tariffs, which did start rocking the market earlier this year and whose fear is still relevant today.
Of course, in October 2018, the market has taken a downturn. Our view is that this is fundamentally caused by fear of aggressive rate hikes by the Fed, which Trump has criticized. You can read more about this here.
How this will play out remains to be seen. There is some early indication that the 2017 Tax Cut was a short-term stimulus and had not really promoted additional long-term investment in the US economy or significant wage growth. The single biggest upside from the administration would be to bring the tariff issue to a successful conclusion. I don’t believe that Trump will have any influence on the Fed, no matter how many times he tweets about it.
One thing that I would remind your readers is that historically, the economy has had no correlation whatsoever to the president’s party, both growing and shrinking under Democrats and Republicans. Most economists agree that economic policies and drivers (while can be initiated by an administration) take many years to make profound effects, so it’s usually inappropriate to place all the blame or all the praise on one president or another.
APIS Capital Management is an alternative asset manager specializing in long/short volatility strategies driven by our market experience and advanced machine learning algorithms. We focus on short-term volatility in the S&P 500 index, as represented in its options, the VIX index, and VIX futures. We also look at longer-term macroeconomic trends, as those dictate more global adjustments to our strategies.
There is no doubt that the Trump presidency has been good for the stock market.
Don Fishback Options & Trading Expert & Trainer.
Over the long-term, stock returns follow earnings growth plus dividends (Vanguard founder John Bogle calls this “Investment Return”).
Earnings growth has been explosive in the past two years. According to S&P, the total earnings of the stocks in the S&P 500 are up 45% since Trump took office.
The growth in earnings has taken place for three reasons: Corporate tax policy, deregulation, and improving economic activity.
Although his opponents don’t want to admit it, Trump deserves credit for the first two. And improving economic activity is a consequence of the change in corporate taxes and deregulation.
The first two components, which lifted the earnings – and the spirits – of corporations and business owners, indirectly impacted business planning for the future. That is, businesses increased investments in people and equipment, as business leaders became more confident of persistent, non-sputtering growth.
The result has been ever-increasing employment growth, even at a time when many economists thought the US economy was at full employment. And that employment growth has led to the highest level of optimism among US Consumers since the 1990s!
That said, I am deeply worried that the gains in the US economy are going to be undone and that earnings might even turn lower. And it has nothing to do with the results of the US election.
The global economy is highly dependent on US policy.
China was already in a bubble that was leaking air. Talk of tariffs has taken a further toll on the Chinese economy and its stock market. Other developing countries are seeing their stock markets crumble; the MSCI Emerging Markets Index is down more than 25% from its peak. The global demand for raw materials is falling hard; you can see it in the price of oil and copper.
Meanwhile, our Federal Reserve continues to hike rates in a policy designed to be a “restraining factor for economic activity.” That is a direct quote from the Federal Reserve meeting minutes.
In other words, because of fears of a potential rise in inflation, Fed policy in 2018 has been to restrain economic activity by raising interest rates.
That policy, which continues today, where the Fed hikes rates during a period of a rapid deflation in raw material prices, is reckless and dangerous. It is the primary cause of this most recent global stock market pullback.
This is the ultimate irony. Trump Administration policies are designed to put people to work, while the Fed is striving to restrain economic activity.
Additional Note: You’ve got to separate “Trump the Man” from “Trump Administration Policies.” The stock market had a hard time making that distinction during his first year in office, as it reacted to tweet after tweet. Traders have made that adjustment, and now simply focus on policy.
Don Fishback is the creator of ODDS, the pioneering method for calculating financial market probabilities.
The Trump Presidency has been mostly irrelevant to the current stock market.
David Reischer – CEO of LegalAdvice.com
The Trump Presidency has been mostly irrelevant to the current stock market rally of the last two years. The recent stock market rally has been mostly a consequence of the Federal Reserve policy of low-interest rates and bond-buying of US treasuries via the Quantitative Easing (QE) program implemented under Fed Chairman Ben Bernanke. The Federal Reserve under the guidance of Janet Yellen and then Jerome Powell have been much too slow to recognize the enormous credit bubble that was engendered by his predecessors.
As a consequence, President Trump has inherited a U.S.economy and stock market that is completely dependent upon the creation of credit out of thin air. The Federal Reserve and the massive accumulation of debt that the United States has undertaken is much more responsible for the current stock market rally than any of the policies implemented under President Trump, including his tax cuts. Rather, the Federal Reserve has created an environment in which companies have bought back their own stocks at a record pace to front-run the bubble in stocks that all executives know are the benefits of the ultra-loose monetary policy.
David Reischer is an entrepreneur and the CEO of LegalAdvice.com that practices in the area of commercial business, securities, and bankruptcy law.
All politics aside, the Trump Presidency has been extremely good for the stock market.
The market has been rising since the day President Trump was elected in November 2016, and it is only in the last few months, that any type of genuine price correction has occurred.
The Russell 2000 Small Cap Index of small companies throughout the US rose to all-time historic highs in the first two years of his presidency, confirming the optimism out there on the bottom line for small businesses across the United States.
President Trumps pro-business approach, combined with the lower tax rate policy implementation as well as his deregulation efforts for small businesses across our country have inspired those in the business community to want to work with and rally around his administration to solves some of the issues they thought were hindering their capital expansion previously.
They now wish to grow their businesses, free of some of the costly and time-consuming regulation strangleholds in place from prior administrations.
Overall, my own view of the Trump Presidency is that it has had an overwhelmingly positive impact on the business community, and for the stock market as a whole in the first two years of his Presidency.
Joe Soja – Expert Day Trader and contributing author to LiberatedStockTrader.com
Trump Temporarily Boosted the Stock Market
Lyn Alden, founder of Lyn Alden Investment Strategy
Trump has almost certainly boosted stock prices in the short term. The recent tax cuts reduced the corporate tax rate from 35% to 21%, which has significantly boosted the S&P 500 net earnings.
In addition, small business optimism spiked higher in November and December of 2016, right after Trump’s election, and have remained elevated. The combination of heightened consumer and business optimism with the wealth effect of higher stock prices resulted in a self-reinforcing cycle that pushed asset prices up across the board.
However, over the long term, the policies under this administration are not sustainable. The fiscal deficit is now over 4% of GDP, indicating that the economy is basically running on a sugar high from stimulus at the height of a bull market, leaving the government with very little ammo to deal with an eventual downturn when it inevitably comes.
Alden Investment Strategy provides market research and investment calculators to individual investors and financial professionals.
The Trump presidency has been good for the stock market.
Charlie Corsello President and Co-Founder of TaxDebtHelp.com
I believe the Trump presidency has been good for the stock market. For one, he cut taxes both on the corporate and personal side of things. The corporate tax cut made US companies more valuable and more globally competitive, which naturally led to an increase in stock prices. Trump has also increased consumer confidence and business enthusiasm by slashing regulations. Specifically, Trump set a cap on various agencies and the rules they can impose each year. 12 of 22 agencies have met their goal or surpassed it.
From a negative standpoint, Trump’s protectionism and tariffs are impacting the stock market negatively. Tariffs are essentially a tax on US consumers and make the cost of importing products more expensive. However, I do believe that Trump’s tariffs are a means to an end, that end being a free trade on both sides or fair trade. He is using tariffs to get nations to come to the table and negotiate. However, if they don’t negotiate, it has an adverse effect on the economy as the trade deficit keeps widening.
Finally, many will claim that that the stock market was already on the uptrend, and the global economy was due for an expansion, which is also true in many ways.
Charles Corsello is President and co-founder of Connecticut-based TaxDebtHelp.com, a national provider of tax resolution, tax settlement, tax guidance and services. He is a licensed tax professional.
Clearly, his rhetoric affects markets
Tim Brown – Web Designer, Marketer Founder – The Hook Agency
When a President talks about cutting regulations, the stock market gets excited. ‘Animal Spirits’ are the ‘spirit of the market’ and relate to hiring, planning, and anticipating, perhaps lower taxes and more freedom to do work without the government interfering. To me, it seems obvious that this type of rhetoric has stimulated ‘animal spirits,’ and led to a generous rise, albeit tenuous. The administration has to follow-through on some of its promises still – and then it remains to be seen if those will indeed support the rise long term.
Trump has made me over $1.5 million!
Yes, he’s responsible for the rally because of the corporate tax cut. Here’s living proof – Maxine Waters wants to regulate the banking industry and look at what happened; the market plummeted yesterday. If Hillary had won, no way, she would’ve done a corporate tax cut, if anything, she would have increased taxes.
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