4 Years of Trump VS the Markets. Who Wins After 4 Rounds?

November 5, 2020 at 11:46 AM

President Trump branded himself as something of a saviour for the financial markets during his tenure. 

He repeatedly stated, often vociferously, how the markets “love” him, and also publicly celebrated the strength of the world’s largest economy, taking most of the credit for its positive performance in the process.  

His grandiose claims aren’t unlike a boxer’s public declarations before a fight, a commonly-used strategy to ‘psych-out’ opponents and promote the event they’re taking part in. 

Trumps’ continuous claims that the markets are stronger than ever, began when he first took office. He’s credited the strength of the markets to his administration’s pro-growth policies. 

In fact, he’s tweeted about how great he is for the markets, at least 150 times since he’s been in office, taking jabs at the Democrats’ performance whenever he can. 

But has the market really come out on top after 4 years of Trump? Let’s take a closer look, separate fact from fiction and see which one of the two wins after the last 4 years of Trump as president.

Let’s get ready to rumble! 

In one corner… 

U.S. President Trump, weighing in at 235 pounds (according to his doctor), and prone to punching below the belt. His strengths; insisting loudly that his presidency has been GREAT for the markets.

And in the other corner … 

The data, weighing in with a series of cold, hard-hitting facts (and also a few Trump knockouts under its belt). 

ROUND 1 

During his first year in office, the stock markets responded well to President Trump. It was a trend largely driven by an increase in tax cuts and the Fed’s decision to lower interest rates. As a result, the market was not only stable but seeing consistent positive growth too. 

In the 3rd quarter, GDP (gross domestic product) reached 3.3%. The stock market saw great growth, even breaking the 90-year record of positive returns for all 12 months.  

The S&P 500 went up 19.42%, and its total return was 21.83%. This bullish market was the second-longest in modern history, beginning from March 9, 2009, and continuing 105 months through December 2017 without experiencing a decline of 20% (or more) from a closing high. 

A new tax bill approved in December of 2017 lowered the corporate tax rate from 35% to 21%. This contributed to some of that market growth. The lower tax rate improved profit margins. The oil market finished the year on high (yes, those were the days), rallying in the last months of 2017. 

Moreover, consumer spending and retail sales are also nurtured throughout the year. 

All the growth culminated in a first-round win for Trump. Many attributed this great market run as a legacy of Obama’s economic plans, but, not surprisingly Trump didn’t agree, and didn’t hesitate to take all the credit. 

ROUND 2

Trump’s second year in the office started smoothly but was met with a sharp decline that resulted in zero net progress. 

2018 was a tenuous year for the markets in general, which hit record highs and severe reversals. This was the first time ever the S&P 500 saw a drop after rising in the first three quarters. 

In the last quarter, both S&P and Dow Jones plunged 13.97% and 11.8%, respectively. December was a frustrating month, as all indexes dropped 8.7%. Also, Dow and S&P 500 recorded the worst December performance since 1931. 

The main reason for this uncertainty was that investors were fearful of the Federal Reserve’s policies and concerns over the U.S-China trade deal. 

Besides this, there was a decline in the gold, oil, and bonds market. However, not all was wrong in 2018. First, three quarters saw a bullish trend, and the USD went up by 4.5%. 

So we’ll call this one as a win for Trump, even if it is tenuous. 

ROUND 3

Entering into the third year, we begin seeing a different story. Trump starts a trade war with China, and the stock market declines, mostly due to rising interest rates and the president’s handling of the on-going Chinese trade negotiations and recreation of NAFTA (United States, Mexico, Canada Agreement). 

The trade war was a major headline for the markets throughout the year, but something happened, which nobody was expecting. After the inception of the bearish market, the year ended with the biggest gains from stocks since 2013. 

The S&P 500 went up 29%, and the Nasdaq went up 35%. With the Nasdaq upsurge, Microsoft and Apple enter into the trillion-dollar club. 

So, how did that happen? It was mainly due to a change in the Federal Reserve policy. With the falling interest rates, investors poured their money to get more yield. 

However, the growth rate was slower than in the previous two years. 

ROUND 4

2020 started with the bullish trend, and everything was going smooth, until…. you know what I am talking about; Covid-19, or as the president called it, the “China Virus.” 

On March 18, 2020, the stock markets plunged to the same level it had been on the day of President Trump’s inauguration. That means any progress under Trump’s presidency was wiped out in a matter of two weeks. The real shocker was oil prices. The WTI plummeted 65% since January 2020. And it is not looking great ahead either. 

The market did recover from June as bulls started to overthrow bears. FAANG (Facebook, Amazon, Apple, Netflix, and Google) were apples of investors’ eyes. Also, gold prices went way up, crossing the $2000 mark. 

This was a good sign for the Trump administration as this was a hard year, and it was also a good sign for traders and investors who were pulling their hair when the pandemic started. Republicans even announced a $2 Trillion coronavirus relief package to boost the economy. In addition, it provided jobs to more than half of those people who lost their jobs during the pandemic. 

But, the pandemic isn’t over. With lockdowns already starting to take place in Europe, and the U.S. elections, the markets will remain uncertain, at least for a few weeks. One major concern is the declining USD. Many analysts predict that this uncertainty will decrease after the election results. We just have to wait and find out. 

The Winner Is…. 

With the 2020 elections result still coming in, Donald Trump did what he promised. After 4 years in the white house, Trump delivered for the markets, before experiencing a crushing defeat by ill-advised strategies and a global pandemic.  In the first year, the stock markets saw record-breaking highs. No one is to say what the data would have shown had COVID not occurred. All being said, the markets have been relatively stable under Trump, if you count out the uncertainty caused by the pandemic. However, the reality is the pandemic did happen and worsened what was already a troubled market.

What Now?

As election drama unfolds, we’re on the verge of finding out if a new game of boxing begins between Trump and the Markets. 

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