Here we discussed the A Short History Of The Donald Trump Effect On The American Stock Exchange. Donald John Trump, the 45th and current president of the United States of America, a businessman and TV personality before he entered politics.
He selected over the greatly respected Democratic person going up for position Hillary Clinton to become the eldest first-term us President. Trump’s current net worth is almost USD 2.1 billion as per Forbes, which makes him the first billionaire president.
Presidents take a lot of credit and blame as people feel they can influence the share market and its performance while they are in the office.
Donald Trump Effect On The American Stock Exchange
President Trump is the first person to use social media to such an extent while he is still in power. He regularly tweets his thoughts and opinions through his own Twitter handle.
Mr. Trump names publicly traded companies more often than any other president. These tweets by the president openly naming companies on the share market relate to his feelings about the company and hold the power of shifting common people’s trust over that company.
What affects the US stock market?
People believe that the president is responsible for implementing and enforcing market laws and regulations, but it is Congress that sets tax rates, passes bills, and enforces regulating laws over the economy.
He has insider information about the government’s policies and regulations, which makes him such. When a company receives attention from the president, it might encourage political supporters to buy the company’s products.
This free advertising by the president of the US may sometimes affect the share market. Shares of a particular company might drop if president Trump tweets negatively about it, or vice-versa.
President Trump’s political positions can be termed as populist as he has supported various political positions throughout his term, some of which were not consistent with even the policies of the Republic Party.
President Trump emphasizes that people should judge his presidency based on the gains of the stock market right from the day after elections. The share market soared right after the win of Mr. Trump’s presidential election.
The S&P 500 gained 20% in 2017 as traders were looking forward to tax cuts and remunerations promised by Mr. Trump during his presidential campaigns. This phenomenon came to be known as “The Trump-bump.”
The Effect Of Trump Assuming His Position As POTUS
Expensive Stock Market
Starting from the end of 2019, a lot of investors speculated that Trump would provide tax relaxations, as he stated in his campaign. Looking at this, they started ingesting a lot of money in the share market.
The prices increased, but the companies could not keep up fast enough, and the earnings were reduced, resulting in a diminished value of the share market. The average income paid by S&P 500 companies also derailed because of the same reason.
As a result of this campaign, the stock market became expensive. Although the market showed good growth overall, the Price to Earnings ratio (P/E ratio) increased.
A lower P/E value suggests a better value as opposed to a higher P/E value. The CAPE ratio also increased, and the dividend yield decreased, suggesting the same trend.
US Government Bonds
The prices for the US treasury or government bonds declined sharply during the year 2017. This happened because the US Federal Reserve increased rates from 0.5% to 1.5%.
The share market performed very strongly. This was because of the inflationary expenditure by the Trump administration. When the market is rising, investing in government bonds becomes less attractive because they pay a fixed income.
This was another reason why the value of government bonds declined during the first year of Trump’s administration.
The US-China Trade War
Starting in the year 2018, a trade war between two important economies in this world, the USA and China. The USA started imposing tariffs and trade barriers.
The US did this to ensure that China will make modifications to its current trade disciplines, which, according to Trump, are “unfair.”
Trump asked the USTR to review and apply tariffs on USD 50-60 billion worth of Chinese goods.
China reacted to this by raising tariffs on 128 goods it ships from America. Investors got confused by the conflict. It propelled ripples within the stock market.
Corona Virus or COVID-19, as we call it, is result in the deaths of almost 74 thousand people in the USA.
This global pandemic has created a doomsday situation for economies all around the world and the USA too. Share markets are on a continuous meltdown.
The shocks have resulted in a great depression. More than USD 8 trillion in shareholder value is destroyed. The Volatility index, which measures investors’ mood, is on a high rise.
On four occasions, automatic circuit breakers stalled the trading to halt falling sell-offs.
Although the situation in which the US share market is in right now seems irreparable.
The decline came weeks after Donald Trump thumped his back over Twitter when he claimed to create the “highest stock market in history.”
This plunge is not the fault of Mr. Trump, but he kind of brought this upon himself when he forced people to look at his achievements through the rises and falls in the stock market.
Donald Trump believes the market will take care of itself during this pandemic. He believes that the market will survive, no matter what.
Although he has a history of making policies and laws which immediately affect the share market.
The public is eagerly waiting for his next moves during the COVID-19 crisis.