As someone who’s ‘of a certain age,’ and who has been attempting to save and invest money for retirement for several decades, I’ve grown a bit weary of the financial news outlets’ method of reporting market and stock performance. Specifically, they talk a lot more about daily movements, or cherry-picked low-high and high-low swings, a lot more than broader trends. While this may suit the day trader, it doesn’t do much for buy-and-hold types.
Of course, partisan political wonks do much of the same. I see Trump supporters, especially, talking up the big gains the Dow has made in 2019. And, indeed, the Dow is up 4000 points since its recent nadir at the end of 2018. But… that doesn’t tell the real story.
Take a look at the Dow Jones average on three particular dates in recent history. Lets call them Dates 1, 2, and 3. I’ll explain the dates in a moment, but first, the numbers themselves:
Date 1: 17888
Date 2: 26617
Date 3: 26593
The average increased nearly 50% from Date 1 to Date 2, but is unchanged from Date 2 to Date 3. The span from Day 1 to Day 2 is about 15 months, from Day 2 to Day 3 a bit over 20 months.
It might be argued that I’m as guilty of cherrypicking as the financial pundits I decried earlier, but the three dates I picked have particular significance:
Day 1 is November 4, 2016, just before an election that Hillary Clinton was widely expected to win.
Day 2 is January 26. 2018, approximately the beginning of Trump’s trade war.
Day 3 is this afternoon, when I started writing this blog post after hearing that weak reported manufacturing growth turning the market south.
Trump supporters crow about the Trump economy, and not without reason. The Dow made massive gains his first year+ in office, the economy is at virtually full employment, and the labor force participation rate has been increasing. But, GDP growth isn’t what many hoped, and the bragging about the 2019 gains ignores the equally large losses across 2018. For the record, the Dow dropped 3000 points in the two months after Trump declared “war,” slowly regained those losses across the next 6 months, then dropped 4000 points in the final 3 months of 2018. An average investor in indexes has experience nearly 2 years of market stagnation after a fantastic run-up in 2017.
While economic prognostication is notoriously difficult, even for the John Tulds of the world, and while correlation is not causation, it’s an easy lament to ponder how substantial the opportunity cost to the nation’s economy due to the trade war. Nearly two years of market stagnation, and less-than-hoped GDP growth, might have not come to pass had Trump’s terribly misguided and nativist views on trade, trade deficits, tariffs, and the like not become policy.
We are just about 13 months from Election Day. While Trump faces a non-trivial risk from the impeachment inquiry that the Democrats controlling the House recently initiated, I, as of this moment, expect that it won’t succeed in unseating him and that he will be the Republican candidate for the Presidency on November 3, 2020. He will likely be facing a challenger who’ll be vocally intent on undoing the changes that have occurred under his watch, including tax cuts and deregulation (I expect the Dems to continue the protectionist mistake, but that’s no benefit to them in an election), and a strong economy going into the election would be one of his most valuable assets.
Some of his supporters think that the trade war with China is merely tactical, intended to bring about freer trade and correct some of China’s intellectual property transgressions. Others think that it’ll “bring jobs home” by encouraging companies to make stuff domestically. And, some believe that trade deficits and imbalances are a “thing” that needs correcting. The first does not jibe with Trump’s behavior and rhetoric, but the other to do. Unfortunately, the first is the only one that might make sense from an economic perspective, and even then, the harm done during the war is “lost opportunity” as I discussed above.
In any event, Trump is running out of time. With global grumblings of economic downturn, and with equally bone-headed nativist economic policies being pursued by many of the other major world economies, Trump risks losing one of his strongest talking points ahead of an election where he’s got a whole lot working against him (including an endless list of self-inflicted wounds and unforced errors). While China may have to deal with someone just as nativist as Trump (Elizabeth Warren’s plan is a two-barreled exercise in awfulness: nativist trade policies coupled with hatred for corporations and the profits they earn as they produce the goods and services Americans want), the average voter may be less inclined to think to keep Trump despite all his other issues if the economy has turned.
My advice today isn’t for Trump or his campaign, but rather for his supporters who wax positive about his trade war: Just take a clear-eyed look at things and realize what it has cost, instead of blindly supporting it because he told you it’s easy to win and because the Democrats are all shitty.
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I have to wonder if Trump isn’t planning an October surprise for next year….
“Hey look I’ve reached a trade deal with China.”
I’d have to think the markets would jump up biggly.
To be fair, it doesn’t do anything for more active traders either. “Financial news” is a lot of picking headlines from desk drawers to fit what happened, as in they are consistently behind the 8-ball in their “reporting”.
I suggest TastyTrade for anyone who wants to upgrade their knowledge and skill.
Sorry this was a general reply to OP.
That *has* crossed my mind, and it fits with some things we know about him but not with other things.
Time will tell.
Let’s equate real war to trade war. Not even the most hardened generals support them and they are generally considered hawkish.
Real wars are a last resort measure.
I’ve asked learned friends for intermediary steps to contain China’s Cold War on our corporations and commerce without. Response. I see you’re against the trade war. Makes sense. What was the step we missed before we got here?
China’s IP abuses are a tough nut to crack, but damaging our own economy isn’t an answer that makes sense or is working.
I’d vigorously pursue a series of bilateral free trade agreements with all China’s neighbors and competitors. Pressure her economy and her leadership that way, as in “if you’re not going to play nice, we’re going to get cozy with everyone else.”