Probably the guy getting the hardest hit right is the Donald, with the stock markets all over the place. After all, this was his baby. He's been boasting ever since Election Night that he owns the Dow. It went on a massive bull run his first year in office, peaking at 26,600 on January 26, 2018. We heard his gloating to no end, but here we are more than two years later and the Dow sits at 25,020, thanks to an 1160 point surge yesterday after the big sell off on Monday.
Trump isn't gloating anymore. His finance team is offering a number of quick fixes in an effort to instill confidence in the market. However, it seems traders are only taking advantage of the volatility by buying low one day and selling off the next. Futures were down over 500 points last night, which means we will see another big selloff today.
You live by the Dow, you die by the Dow. Economists have long warned not to take the Dow as a measure of economic success. However, our dear president would like to have it both ways. When it is up, he takes all the credit. When it is down he blames it on fears stoked by the fake news.
The Fed's attempts to appease him by lowering prime rates and introducing quantitative easing have done little to allay worries on Wall Street. Last summer, the economy appeared to be solid, which led Jerome Powell to raise the prime rate incrementally, but it turned out to be too fragile, and he cut rates this past winter, which pushed the Dow up to the point it finally might break the magic 30,000 barrier. However, the bottom fell out when news of the coronavirus hit, and the Dow sunk over 6000 points in a matter of two weeks.
However, this goes far beyond the coronavirus and to a gambling mentality that seized the stock markets not much unlike 2008. Stocks similarly were enjoying great peaks before finally crashing in October. Now as then, supply far exceeds demand, proving once again that supply-side economics doesn't work. This has been championed ever since Reagan's time by Republicans, presuming supply creates its own demand.
What it creates is a very volatile market place that favors gamblers who have money to burn. Coronavirus simply exposed the numbers game being played here. We had an economy that was riding high on a wave of false expectations. This is what you get when you put together a finance team comprised of venture capitalists and Fox economic advisers, who encourage traders to buy on the dips rather than offering any kind of long term investment strategy.
The Trump White House is finally having to deal with the prospect of a major recession on the horizon, presenting a number of quick fixes that they hope will stabilize the economy and allow him to pass the recession onto the next guy. His finance team is floating a payroll tax cut, not much unlike that Obama offered in his stimulus package back in 2009. However, Obama also demanded tighter regulations to rein in the rampant speculation taking place so that the markets would have time to adjust to the lower expectations. This is something Team Trump is not willing to do.
So, we are right back where we were in 2008 with an economy spinning wildly out of control and the wrong people pulling the levers desperately hoping to bring it back under control. We can only hope that some of the Obama-era safeguards remain in place so it won't be as devastating a blow this time around.
Whatever the case, Trump's days are numbered. There is little likelihood he will be able to stave off a recession over the next eight months, which means all that consumer confidence goes out the window. You can see in his demeanor that he has neither the wits nor the energy to do anything about it. Events are swirling beyond his ability to spin them in his favor. So, he does what any cornered politician would do, lash out at the media.
Judging by the sudden surge in Joe Biden's candidacy, sweeping the vast majority of the states over the last two Tuesdays, people want a return to normalcy. Although this "secret governing plan" has been roundly panned by the media, Democratic voters clearly favor the idea. Biden took Michigan by a whopping 16 points over Sanders, all but laying Bernie's social revolution to rest. This was Bernie's last ditch effort to remain a viable challenger. Even in liberal Washington, Bernie clings to a razor thin lead, with only 2000 votes separating him from Biden with 67 percent of the precincts reporting.
This does not bode well for Trump, who has let it be known on twitter what he thinks of the whole process. He desperately wanted to square off against the Democratic Socialist Sanders in the general election, not the Affable Joe Biden.
Well, this is a mess of his own making. If Trump hadn't put so much pressure on the Fed last year to cut rates, worked out his back door deal with Saudi Arabia to flood the market with oil or continued to spend money like there is no tomorrow, racking up over $3 trillion in budget deficits in three years, we might actually have a very stable economy. Instead, he played the market like he played his casinos, coming up snake eyes.
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