Tim Mullaney: The cost of Trump keeps rising almost daily
Friday’s jobs report gave markets one way to look at Donald Trump’s stewardship of the economy. But JPMorgan Chase’s unveiling of its “Volfefe Index” — a mashup of the actual market-relevant word “volatility,” from the English language, with “covfefe,” an instantly famous creation on the president’s Twitter feed in 2017 — gives you quite another.
JPMorgan estimates that volatility from Trump’s bellowing tweeted b.s. is costing bond investors big-league.
Also read: Trading on Trump’s tweets would have left you sad and poorer
But behind jokes about the index with the funny name lies a point about how costs of the president’s narcissism and mistakes add up, or don’t.
Cost of trade war
Last December, Bank of America Merrill Lynch estimated that the president’s tweets and moves on trade negotiations had cut 6% off the value of major U.S.stocks. Last month, JPMorgan estimated Trump’s existing and threatened tariffs on China would cost the average household $ 1,000 a year — not chicken feed, considering that median household income is about $ 61,000.
So, $ 1,000 a year in the stores, $ 20,000 in stock value lost last year (the average baby boomer with a Fidelity IRA is holding just over $ 350,000), and more, at least for people who trade exotic instruments JPMorgan calls “swaptions” or who buy gasoline while Trump ineptly cajoles and threatens Iran.
A few hundred or thousand bucks per household, adding up to trillions, are routinely spent, gained or lost on volatile swings as Trump says or does things that are dumb, ill-informed, and sure to be walked back.
A small price for all the entertainment, the odd intelligence leak to Russia that risks getting U.S. sources murdered, and the chance to pump taxpayer dough into for-profit jail companies at the Mexican border, or to have everyone from Air Force pilots to Vice President Mike Pence and G-7 leaders swinging business to Trump’s struggling hotels.
He may not have fixed much — but he sure is doing it alone.
Moving the markets
“The subject of these tweets has increasingly turned toward market-moving topics, most prominently trade and monetary policy,” JPM’s Munier Salem writes. “And we find strong evidence that tweets have increasingly moved U.S. rates markets immediately after publication.”
The whole topic of how seriously to take this president has been a topic of serious conversation since before he was elected. The journalist Salena Zito was briefly famous for lecturing journalists to take Trump “seriously but not literally” before his actions revealed themselves as unworthy of either.
I’ve had my fun with this, doing a 2017 column pointing out that Trump’s track record of picking investments on Twitter is worse than your kid could do — if you’d bet on Trump’s tweets about specific companies until then, you’d have lost money two-thirds of the time.
This included tweets about trade mentioning General Motors GM, -0.54% ; United Technologies UTX, +0.44% ; Toyota TM, +0.64% ; and even Rexnord RXN, +0.14% , a Wisconsin manufacturer of industrial drives and plumbing supplies, up 32% since Trump tweet-raged about its plan to move 300 jobs to Mexico in December 2016.
Who is Trump?
We all veer between understanding that the president is a clown, an economic illiterate, and pondering whether he’s a clown with unique consequences. An answer can be found in pulling back the camera a bit, to see how long Trump effects last.
JPMorgan’s piece finds Trump’s effect is best measured in minutes. Merrill’s piece last December showed an impact on stocks that evaporated when Trump went quiet on trade for a few months, letting the S&P 500 SPX, -0.07% and Dow Jones Industrial Average DJIA, +0.14% recover.
Even in the real economy, Trump is, like other presidents, beholden to larger forces — and his own inability to sustain effort.
Remember the big post-election stock rally? I do, if only because Trumpers remind me of it so often, charmingly forgetting it began in February 2016. The post-election part was concentrated in financial stocks initially, for two reasons: bets that interest rates would rise as Trump boosted growth (which didn’t happen), and wagers that repealing Dodd-Frank and the consumer-protection-focused “fiduciary rule” for financial advisers would boost business by facilitating a higher but still acceptable (to Trumpers) level of Wall Street corruption.
What are interest rates doing now? Yes, class, they’re falling. Dodd-Frank is still here, though the fiduciary rule’s gone. Bank stocks have lost 18% in the past year, per Keefe Bruyette & Woods’s bank-stock Index BKX, +1.19% .
Similarly, let’s talk about oil.
Trump also set out to raise oil prices CL.1, -0.05% — at least, he had to know they’d rise — when he announced sanctions on Iran while pulling the U.S. out of the nuclear nonproliferation deal with the Mideast nation. But crude-oil prices that spiked after sanctions were announced in May 2018 have plunged, along with Exxon Mobil stock XOM, +0.92% highlighting a 19% 12-month drop in the S&P 500 Oil Index (Moscow-based Lukoil’s up).
So another $ 1,000 a year or so that Trump was costing households in higher gasoline prices has, at least, returned to our wallets — partly because markets trump presidents, and partly because this President Trump now thinks he can make a deal with Iran.
Moral: Sure, Trump costs you money, but only for a while. His stock returns now that the 2017 rally has petered out, and the 2018 trade-driven bear market has corrected, are nothing extra, folks — Obama’s were better, and so were Reagan’s and Clinton’s.
The trade impact will go away, too, when he does, just as his impact on gas prices already has. Treasury Secretary Steven Mnuchin promised an election-year tax cut on Monday, and people ignored him.
Just because one fool has money doesn’t mean that you and your cash should be parted.