Trump supporters have been sending me short messages asking, “How is your 401[k] doing?” They are making three assumptions.
- That the stocks in my retirement account are doing well.
2. That I’m happy about it.
3. And that I have President Donald Trump to thank for my good fortune.
Assumptions one and two are correct. Three is not. The stock market and the larger economy actually did much better under Barack Obama than they have under Trump.
First off, presidents don’t have nearly as much control over the stock market as many believe. Presidents inherit different business cycles. New technology [the internet, for example] influences economic developments, as do black swan events, such as the Sept. 11 attacks. We could add the COVID-19 pandemic to the surprises, though in such cases, presidents who meet the challenges can speed up a recovery. Trump has not.
But since Trump and his boosters break out the brass instruments every time stock prices make a notable advance, let us inspect claims crediting the president for these pleasant market closes.
Start with the numbers. In the first 43 months of the Trump presidency, the S&P 500 index rose about 49% – a nice gain, for sure. But in the first 43 months of Obama’s, it was up more than 70%.
Keep going. Over Obama’s two terms, the S&P 500 rose 176%. Under Bill Clinton, it absolutely soared, by 211%! So the idea that Trump is some kind of stock market miracle man is – excuse my French – BS.
Then there is the real economy, where misery continues to haunt the land. The wealthiest 10% of Americans own 84% of the stock, which suggests that there are a heck of a lot more working stiffs going broke during the coronavirus recession than stockholders riding high.
The real economy remains in tatters, largely because of Trump’s incompetence and uninterest in bringing this virus under control. At least 22 million jobs were lost, and despite some comeback, only 42% of them have returned. The unemployment rate remains above 10%.
On that subject, Trump produced 1.5 million fewer jobs in the first three [pre-COVID] years of his presidency than Obama produced in his last three years. And as the economy boomed, Obama saw no need to push a deficit-exploding tax cut that would have favored the top incomes while producing only a temporary bump in capital investment.
It is true that the stock market is not the economy, but it doesn’t follow that they are unrelated. Investors are rightly worried that the weak economy will come back to bite them. They know that most of the gains reflect a handful of tech stocks that many Wall Street analysts warn are now grossly overpriced.
“Stressed About U.S. Stocks, Investors Are Betting Big on Europe,” reads a Bloomberg News headline. The story cites a survey of fund managers that finds a growing preference for investing in Europe over this country. The reason is that Europe, having brought the virus largely in check, is reopening. We remain stuck in the jaws of the pandemic.
One other consideration. I like a healthy 401[k], but I love my country more. The coronavirus was bound to hit here, but we didn’t have to suffer this level of sickness and death. And even as stock prices have held up [so far], the economy remains dreadful for millions of shops, restaurants and other Main Street businesses not listed on any exchange.
Meanwhile, investors who still think that Trump is pulling prosperity out of his magic MAGA hat need reminding: They did much better under Obama – and so did everyone else.