The Dow Jones Industrial Average, America’s most popular stock market indicator, is down about 4000 points from its all-time high of 26,000 something. Most of that decline, (which has been echoed in every other market index) has occurred in the past month, making it the most precipitate sustained drop since the 2017-2108 banking crisis. Investors are setting off for the hills, taking their money with them.
So what happened? Actually, not much of anything.
The United States economy is in decent shape, still growing and with employment at record levels. Consumer confidence seems to be intact at a consistently high level. Interest rates have lately risen, or have been pushed higher, but not to levels calculated to cause alarm (although an inverted yield curve is not a good augury for the economy a few years out). President Trump has been sabre-rattling China on trade, but China is only a small part of the American trade picture, and Trump has expressed confidence on more than one occasion that China will ‘come around’ – though come around to what exactly he has yet to specify. Meanwhile, the federal government has been shut down, and may remain closed until or unless Congress allocates a hefty sum to building Trump’s wall on the border with Mexico, but even so the economic impact on the national economy will be marginal at worst.
But something must have happened. Why else would investors be so skittish, some downright scared, as to cause the stock market to lose fifteen to twenty percent of its value (and counting) in less than a month?
What happened, I think, is that Trump’s honeymoon ended. Especially with investors who only a few months ago were happy to bask in the market sunshine, the consequences of the administration’s tax cuts and laissez faire approach to regulatory issues. They now fear what mad schemes he might resort to in order to restore his standing in the polls. Even his famed core support base in the so-called rust-belt states must be feeling a little disturbed.
The resignation, or firing, of General Mattis as Defense Secretary rattled a great many people, on Wall Street and on the Hill, Republicans and Democrats alike. The Mattis resignation letter made for uncomfortable reading, revealing as it did a president who does not like to be given and rarely accepts advice. Actually, it was devastating.
With both Mattis and Chief-of-Staff John Kelly now gone, the feeling grows that the common-sense approach that those two – among others recently departed – brought to an increasingly chaotic White House, has fled to brutish beasts. That they leave behind a White House in which major policy decisions and initiatives now increasingly seem to be the sole domain of an ignorant and erratic president who rides roughshod, or fires, over any who have the temerity to question him. If Trump can decide, without consulting his own Defense Secretary, or America’s allies, to pull American troops out of Syria, with all that it implies for American influence in the Middle East, he is capable of doing anything. Nor does it help that he has let it be known that if given half a chance he would fire Federal Reserve chairman Powell, whom he blames for being the sole cause of the stock market jitters.
In other words, ignorant and erratic are now seen not so much as presidential quirks as presidential disqualifications. Fears that the man may just be out of control are now manifest, even in Republican circles. Treating cabinet secretaries no better than administrative assistants and seeking to undermine the independence of the central bank are not merely subjects for Beltway gossip but matters of grave constitutional concern.
Add to that the growing dread in those Republican circles that Special Prosecutor Mueller might just be about to come out with a devastating report on the behaviour of those around the president, if not directly implicating Trump himself, and the fear factor is compounded. Impeachment sounds far-fetched, but not as outlandish as it sounded a few months ago.
What Wall Street fears most, as always, is not the known but the unknown.
There is no reading the mind of this president, nor does there seem to be anyone of stature left in the administration to read it for him. Bad and mad presidents are usually constrained by the experts around them, working in a kind of enforced conspiratorial harmony. In this White House there are no advisers left to conspire or harmonise. To what end, anyway? This administration has no underlying direction other than the amorphous ‘America First’, which is not a strategy, merely a slogan.
Trump is an increasingly lone figure in Washington, and loners can be dangerous. Trump may not have consciously sought to become a dictator, but that is what effectively he has become; and what he will remain at least for the two years left to his term of office. Someone once said – I forget who – that two weeks is a long time in politics. Two years looms as an eternity.
In short, the soaring stock market of recent memory may or may not have been a ‘Trump Market’ but this crashing one emphatically is. Other than the president’s recent bizarre actions, nothing else explains its severity.
The Trump party is definitely over, and not just for Manhattan’s investment banking fat-cats. The stock market will no doubt rebound at some point, as it always has (the cash has to go somewhere) but I suspect that Trump has finally lost whatever credibility or affection he ever had among the elite of the Republican Party and Wall Street.
No wonder stocks are tumbling. And if they tumble much further, the tremors will shake the White House to its foundation.