“The stock market has smashed one record after another, gaining $8 trillion in value,” President Trump noted during his State of the Union address. “That is great news for Americans' 401(k), retirement, pension, and college savings accounts.”
The president was as enthusiastic in saying this, which he had been saying in some version for months, as Democrats, sitting on their hands, were sour at hearing it.
A week later, a plummeting stock market had made mincemeat of Trump's claims, at least as far as the market indices are concerned. The Dow Jones Industrial Average closed nearly 2,000 points below where it had been when Trump was at the podium in the House of Representatives.
But this is not a calamity, just a lesson to a new president not to pin prestige to market capitalization. And the market still closed higher on Tuesday than it had ended 2017. The Dow is still up 32 percent since the day Trump was elected. But this has been a very unpleasant week for those watching their retirement and pension funds closely.
The market is suffering from the traditional problem that comes with good economic news. Last week’s jobs report was stronger than expected, which prompted Wall Street to worry about the advent of higher interest rates as the Federal Reserve gets back to its historical norm rather than remaining in the defensive crouch that has been its posture since the start of the Great Recession a decade ago.
Many investors evidently believe that the recent good news about jobs, growth, and wages means bigger rate hikes than previously expected are coming to prevent inflation. Good news, as they sometimes say in finance, is bad news.
But good news is plain good news for most people who are working, looking for work, or running businesses. It probably won’t be bad news much longer for investors, either, as wealth is created and more money is thus injected into the national economy.
What Trump has discovered is the tactical need for humility in this area. When a president takes credit for the unpredictable ebbs and swells of the stock market, he has to accept blame as well. And presidents, in reality, have very little business taking either credit or blame.
It is a hard truth that politicians and journalists rarely admit and that most voters and readers will not understand. But presidents have very little to do with the stock market’s short-term performance, one way or another.
Yes, presidents amass economic records over time by which they are rightly judged. And, yes, the stock market is one measure of how the economy is doing. But it’s always a question of long-term strength, not momentary spasm.
The president and Congress cannot fix the market to the liking of any particular interest. What a president and Congress can do is create favorable circumstances, or at least avoid doing damage. When they achieve this, and when other conditions outside their control are favorable, prosperity follows. Amid prosperity, prudent, diversified stock investments will also perform well as most companies succeed.
So, Mr. President, don't take credit if you're not prepared to accept blame.