Did Donald Trump just make his first major mistake?
It is a well known fact that politicians should not directly take credit for the stock market performance. While it makes you look good for a brief moment in time, it squarely puts the blame back on your shoulders should the market correct. As it always does.
Will President Trump take credit for the Dow at 18,000 or 15,000 or god forbid 10,000?
Or is that impossible now? Either way, he just shot himself in the foot.
On Wednesday morning, the Dow Jones Industrial Average broke 20,000 for the first time.
After trading just below this milestone — which is notable largely for its psychological significance — for about a month, a recent rally in stocks sent the blue chip index above 20,000 for the first time. The benchmark S&P 500 and tech-focused Nasdaq were also trading at new records on Wednesday.
And the White House is excited about it.
Following the Dow cracking 20,000, President Donald Trump simply tweeted, “Great!”
Trump adviser Kellyanne Conway was more explicit on Twitter, writing on Wednesday morning that the Dow cracking 20,000 was “The Trump Effect.”
Eric Trump, the President’s second-oldest son, also appeared to credit his father’s election win for the rally and said on Twitter, “Amazing… and he is just getting started!”
After the election of Donald Trump, the stock market enjoyed a sharp rally to new record highs as investors took Trump’s plans to cut taxes and increase infrastructure spending as positives for the US economy.
Trump has also continued his campaign theme of being antagonistic towards US trading partners since his election win, though markets have, to this point, seemed to largely discount any risk of a full-on trade war breaking out.
Of course, even with the recent rally in stock prices — both since the election and over the last couple days — Trump’s election has many investors on edge.
“Policy uncertainty was a topic of concern raised in every client meeting,” wrote Goldman Sachs strategist David Kostin in a note to clients this week.
“While we expect corporate tax reform legislation will be enacted in 2017, the magnitude of cuts and offsetting revenue proposals are unknown. Many tax reform ideas have been discussed in general terms but the administration has not yet endorsed any specific proposals.
“Investor confusion increases when a topic that appears to be gaining political momentum — such as border-adjusted tax reform — is suddenly discredited when the President dismisses the idea saying it is ‘too complicated.’”
And of course, there is nothing inherently meaningful about the Dow hitting 20,000 beyond it being a reflection of how much investors want to pay for a cut of future corporate profits.
As a psychological mile-marker, however, Dow 20,000 does matter. And the reaction from both Trump and other people in his camp prove this point.
The Dow is the people’s index and is the one you’re most likely to find quoted in non-financial news reports about the stock market.
This fact certainly rankles market participants who know the cap-weighting of the Dow is sort of nonsensical, or that the Wilshire 5000 is the real way to capture the total US stock market, but public perception matters.