Trumponomics

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I saw some silliness about how the current bull market has nothing to do with '45 (Trump). That to me is as dumb as giving him all the credit. Presidents can either (a) create headwinds on growth (raise taxes, regulations, energy costs) (b) put tailwinds on growth (decrease taxes, regulations, and lower energy costs through encouraging drilling/pipelines). That can be swamped by other factors, but they are a known variable in the equations -- and they do have SOME ability to influence markets.

I don't care how people vote, or who they like or not. Love or hate Trump anyways, whatever. But I do care about the truth, and the truth is that Trumponomics has done more positive for the economy than Obamanomics did.

Econ 101

Here's the basics:

  • Minor policy tweaks can't overpower some huge event, like housing/dot-com bubbles popping, natural disasters, major wars. So in black swan events, Presidential/Congresses influence is somewhat limited. But day-to-day in non-outlier events, any new information/direction needs to be priced in, and moves can easily drive shorter term trends.
  • Democrats predicted Obama had shovel ready jobs, and all the new taxes and regulations wouldn't spook markets at all... and we had anemic growth (at best), and nowhere near the numbers they promised (and lots of kvetching about companies collecting profits but not investing them into the headwind of threats of new taxes/regulations: they wanted to keep fat reserves, "just in case"). Thus we got the weakest recovery of any recession since the great depression.
  • Then Republicans took the house/senate, assuring that less (taxes/regulations) would get done. They blocked Obama's spending, fought him on every tax/spending increase, shut down the government to prevent more spending -- and we had some better growth than before (and Obama taking credit, and the media touting his charms). E.g. Post 2010 and 2012 was better than pre -- which is the opposite of most recessions, where recoveries are strong and then wane over time.
  • By 2014-2015 the market sort of cooled off, and 2016 was an election year, which is often a bit cool (uncertainty and all the negative campaigning puts downward pressure on consumer confidence and markets).
  • Democrats predicted if Trump won, that markets would crash because of the uncertainty.
  • Trump won, and the markets took off, growing at a faster rate than ever under Obama -- despite the fact that most of the recovery bounce should have long been baked-in, and in fact, people had been predicting a pullback.
  • Then Trump got the tax plan through, which includes reducing repatriation penalties. And the market heated up even more.

The boost of lowered regulations and lowered taxes, seems to have had a noticeably positive effect -- despite the negative pressures of Kim Il Jun's ICBM's (thanks Clinton) and multiple Natural disasters hitting last year (which also tends to cool growth and consumer confidence).

Zooming Out

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Here's the graph that started it. Some people looked at a somewhat doctored graph of Obama's entire term (with some of Bush's thrown in). And claimed that growth was pretty good before. But it really only showed they're not good with graphs. You really need to look at every couple years as a separate event

  • (a) the fannie/freddie housing bubble pop
  • (b) the recovery
  • (c) Obamanomics
  • (d) Republicans took back congress and stop the tax/spend
  • (e) the malaise as we pay for Obamacare and can't get anything done
  • (f) the election year pressures
  • (g) who won, and what that means

Events are discrete -- as markets price in each new bit of info.

Even then, if you can read the chart a little better you see my point. The red (Obama) trend line was a low slope. Then the green-line (election year trend) was even worse (completely flat). Then Trump was elected and how did markets respond to that new information? If it didn't crash, then the Democrats were either liars or fools, because they promised if he was elected we might never recover.

The alternative

If Hillary had been elected, there's a good chance that we would have had a bear market (and we would have got the pullback that people were expecting from a 3rd Term of Obamanomics. Hillary's threat of less energy, more regulation and higher taxes would have been a weight on the market. We would not have seen repatriation of foreign cash, more jobs coming back (putting positive pressure on salaries and hiring).

We have no idea how MUCH it would have mattered (as in exact dollar amounts). But historically, we can speculate pretty clearly that:

  1. If Obama had two terms of unfettered control (controlling all three houses), that he would have continued to raise taxes and regulations, and the markets would have performed much worse than they did.
  2. If Hillary had won, there would have been more downward pressure on markets... based on what she promised to do.
  3. Because Trump won, there's more upward pressure on markets, because of what he promised to do. And the fact that he did some of it, was even better still.

We can debate how much... but the point is the left wants to deny that economics applies to any of their policies, or the Republican ones, because if people thought about the truth, fewer Democrats would ever win. So they have to lie.

Of course Republicans will do exactly what the Democrats do, and claim an entire uptrend is because of them and their policies (and any corrections are because of the other sides policies). And the truth is the tide comes in or out, no matter who is in office. Presidents can just make it better or worse. But it's a lie when the Democrats do it (false because the markets are succeeding in spite of their policies/pressures), it's an exaggeration when the Republicans do it (there's an element of truth, though they might be overstating it).

Conclusion

You can like or dislike Trump... I don't care. But denial that Trumponomics is better for the economy (in the short term) than Obamanomics, is silly. Markets like companies costs going down, and employment and salaries going up.

You can debate the morality of that, and want to tax and regulate more anyways -- because you think it's a net good for humanity or the culture, in SPITE of the economic costs. I'm fine with that. But denying that economics applies, means I'm going to get out the keyboard and mansplain what any moderately intelligent person should already know.

If we had anything like this under Obama, all the media and left would be screaming what a great job he was doing. Since it's Trump, they want to talk about anything else.

In the end, markets are cyclic, and they have many variables driving them up or down. But some key variables include things like:

  • Less regulation means more profits
  • More drilling/energy production/pipelines will reduce energy costs (and national deficits)
  • Lower taxes means more purchasing power for consumers (and higher confidence and more goods sold)
  • Lower penalties for companies to bring their foreign money back, means more local investment
  • Lower foreign aid, cutting back on the U.N., and so on, means less taxes/burdens
  • Getting the job done wrt ISIS/foreign threats, means less risk and expenditures
  • Less illegals competing for jobs (and shipping their money abroad), means more for the people here (this gets complex as in the long term, a lack of labor can have negative pressures on the economy -- but in the short term, it's a win)
  • All these factors reducing costs, means more foreign investment (lower costs of capital, more growth)
  • Companies are announcing hiring and growth (and bonus's) because of that.

All these things are good for the local economy, at least in the short term. And people that can't admit those things have anything to do with the bull market, are just proving their bias.

References