The Donald Trump Stock Market Has Been Mostly Positive. But is He the Cause, or Beside the Point?
The night Donald Trump was elected president, investor fear was palpable, evidenced by the 800-point drop in Dow futures.
After sleeping on it, however, Wall Street warmed to the idea of a Trump White House, and within days it was clear investors were all in on the idea of a pro-business president.
Since his inauguration two and a half years ago, however, the Trump effect on the stock market - either good or bad - has been muted, if not completely beside the point.
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Trump Effect on the Stock Market, in One Chart
Overall, despite some periodic U.S.-China trade war-induced turbulence, the returns have been very good. Since Trump’s surprise election, the S&P 500 is up 37%. Since his inauguration, the index is up roughly 30%. By any measure, those kinds of returns in a two-and-a-half-year span are quite strong.
Has the market been strong because of Trump? Certainly he hasn’t hurt it. Proponents will point to six straight quarters of at least 5% corporate earnings growth to kick off his presidency, or an unemployment rate that has fallen to a decade low. Thanks in large part to the new corporate tax breaks introduced by the Trump administration, corporate profits set new records in 2018 (though the resulting drop-off this year is expected to be steep).
On the other end of the spectrum is Trump’s, shall we say, unorthodox behavior. Markets tend not to like unpredictability, especially from the White House. And unpredictability has seemed like policy in Trump’s White House.
But contrary to the knee-jerk predictions from economists such as Paul Krugman the night he was elected, Trump has not been the market’s Grim Reaper—far from it, as the returns make quite clear. Very little of the drama surrounding Trump—the nuclear tensions with North Korea, the Russia investigation, the constant turnover in his Cabinet, former Cabinet members going to prison, current ones writing anonymous op-eds in The New York Times, alleged hush-money payments to former mistresses, the scathing tweets, etc.—has impacted stocks the way some feared. Escalating trade wars with China, and lately Europe, Canada and Mexico, have been one exception, but they’ve put only temporary dents in the market, never lasting more than a couple trading sessions. No matter the Trump-related scandal, Wall Street has weathered it.
Never was Trump’s minimal impact on the stock market been more evident than it was during last year’s February-through-April market correction (not the fourth-quarter one, which was at least partially impacted by escalation in the trade war).
The first 2018 correction came during a period of relative (key word) calm for the Trump administration. Then, when White House turmoil bubbled to the surface again—13 Russian nationals were indicted for meddling in the 2016 U.S. election, Trump’s tepid response to the school shooting in Florida drew the ire of a nation, Rex Tillerson and Hope Hicks joined the Trump-Cabinet body count—markets perked up again, rising 5.3% from the February nadir.
That, in a two-week nutshell, was the Trump effect on the stock market. His presidency is neither helping nor hurting Wall Street in a meaningful way. Mostly, it’s being ignored.
Given the returns since his election, that’s probably a good thing.
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*This post has been updated from an original version, published in 2018.
