Markets Under Assault

We knew during his first term that Trump was very focused on raising stock prices. He repeatedly touted increases in the DJIA as evidence of his prowess – until, of course, the Covid crash occurred on his watch.

So, it’s no surprise that Trump’s second term has picked up where the first one left off: laser focus on increasing stock prices by whatever means are available. As we all know, lower interest rates can lead to big equity rallies capable of ignoring such trivial matters as exploding deficits and debt-to-GDP ratios.

He might have faced little resistance from the Fed had he not announced draconian, inflation-inducing tariffs at the same time he was pressing Powell to lower interest rates. Stagflation is the Fed’s greatest fear, and they would have loved to juice the economy had higher inflation not been part of the bargain.

Powell had already presided over disastrous inflation once, and he had no interest in going down that road again. He refused to buckle under and was suddenly being called an “idiot” and a “moron” by the very guy who had named him Chairman of the FOMC. His job was on the line, though Trump’s Supreme Court stated otherwise.

Since then, Trump has set his sights on other targets such as the career statistician who released jobs numbers which contradicted Trump’s claims to a fabulous economy and, now, a Fed governor who committed the cardinal sin of doing her job. The charges lobbed against her, by tweet and not any legal process, have not been adjudicated in any sense and concern matters which occurred well before her tenure as a Fed governor.

The bigger issue, of course, is that Trump won’t be satisfied until he has control over the Fed – just like he has over the Supreme Court. And, that should concern all investors who want the stock market to be an actual market and not a device by which authoritarian politicians – this or any other – to enrich themselves, punish their opponents and ensure their reelection.

Even the conservative Wall Street Journal has taken to the editorial page to vent about Trump’s tendency toward manipulation and focus on retribution, in stark contrast to his campaign rhetoric.

Don’t expect Wall Street itself to complain too loudly. The street makes much more money in rising markets than falling ones. And, no one wants to be in Trump’s crosshairs while he can enlist the full power of the Administration, Congress and the Judiciary to crush his opponents. It’s just business.

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