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It’s been a reliable tonic for U.S. equity bulls for almost two years. Nearly every time stocks quaked, Donald Trump has tweeted words of reassurance, soothing fragile markets.
But three weeks after the president rekindled the trade war with China, sending the Dow into a 4% tailspin, traders are growing increasingly impatient for their dose of White House succor. Where is it? Where’s the “good things will happen” or talks are “moving along nicely”? Anything.
“It’s beginning to feel lousy,” said Donald Selkin, chief market strategist at Newbridge Securities Corp. “I own stocks. Of course you’d like to see some kind of a stop to this downtrend we’re in now.”
Stocks have been rattled by trade-related headlines ever since Trump hiked tariffs on Chinese goods earlier this month. Since then, there’s been a tit-for-tat escalation, with China retaliating, the president targeting Chinese tech companies and China subsequently warning of its unwavering resolve to fight. The longer the sell-off goes, the more likely it is Trump attempts to stanch the bleeding.
“He’s not afraid to use his social media pulpit. He’s not afraid to try to jawbone the market,” Chris Gaffney, president of world markets at TIAA, said in an interview. “He does look at the equity markets as a measure of confidence in his administration, certainly with any big problems facing the equity markets he has a tendency to try to.”
He’s surely done it before, and with success. At Christmas, he told Americans that a 20% rout made stocks a buying opportunity and they notched the best start to a year in three decades. It happened in March 2018, when surrogates suggested planned tariffs would include carve-outs, halting a sell-off. He even did it last week, saying he had a “feeling” a deal was close after a breakdown in trade talks sparked the biggest one-day rout of the year. A three-day rally ensued.
But Trump’s been relatively quiet about the market since then. JPMorgan Chase & Co.’s Marko Kolanovich suggested the president’s threshold for market pain is about 4%. The Dow sank as much as 445 points Thursday, headed for a third straight week of trade-fomented losses, and past the supposed put trigger.
Traders exhausted by weeks of back-and-forth disruptions are now yearning for glimmers of progress, especially as the prospect of further tariff hikes still looms. Instead of talking up equity markets, Trump is devoting attention to assuaging a key political constituency, with plans to announce an aid package for farmers suffering under the latest batch of tariffs.
“We need to see a situation like when we had the government shutdown and LaGuardia Airport said that they weren’t going to do flights anymore,” said Crit Thomas, global market strategist at Touchstone, which has about $18 billion in assets under management. The direct threat to the economy pushed Trump to re-open the government. “We need something like that,” Thomas said.
For Ed Confrancesco, president of International Assets Advisory, a solution to the trade standoff would be more welcome than a reassuring soundbite from the president.
“Could Trump move the market in a positive direction with a well-written, well-timed tweet? The answer is yes,” Confrancesco said. “I’m more concerned with the fact that he can do it. I rather markets move based on what he does as president, what the House of Representatives does, not soundbites.”
Still others wondered whether the trade war had escalated to the point where markets have grown inured to any presidential soothing.
“I don’t think that either the presidency or the Fed has infinite power over economic activity or over markets,” said Ed Keon, portfolio manager for QMA, a quantitative firm in Newark, New Jersey. “I’d be a little reluctant to place an investment on the theory that the Fed or president will have my back under any circumstances and I can therefore downplay risk.”
— With assistance by Sarah Ponczek
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