Trump and Stock Market Risks

For the US President Donald J. Trump, who eyes the world through a business lens, 2017 was an excellent year. The Dow outperformed other excellent markets like Japan and Germany. The superb performance can be attributed to the investor vote of confidence in the US economy. The country has displayed an excellent job creation and strong GDP growth. Corporate performance is also strong. The President also claims credit for the economic recovery that actually happened under his predecessor President Barack Obama's tenure.

Tax reforms

It is to be noted that history usually rewards incumbent Presidents holding office in prosperous times. It castigates those who hold the reins of government during recessions. The problem is that the Presidents get excessive credit when things happen as planned and excessive blame when things go haywire. The present American President has taken all the credit for the market bull run. His speeches imply that he has made the DJIA go spectacularly north. The Dow Jones went up 25 percent in 2017. On December 27, it ended 5,000 points added from the figure during Trump's inauguration.

Trump did play a role. His tax reforms contributed to making the investors gloriously happy. The tax rate for corporates was slashed from 35 percent to 21 percent, thus boosting the corporate health. Trump also made his intentions of unshackling companies from the slavery of regulatory burdens, thus contributing to the stock rise. The President has conveniently forgotten that while a few Americans have retirement plans linked to the markets, millions of Americans do not. The latter does not have the requisite cash to take the due risk of buying stocks. The latter is an activity which only attracts a wealthy clientele.

Not a good end in the long run

Although the President has complete right to take credit for a booming stock market, he should figure out that this boom will end sooner or later. This will be due to a global crisis or an economic shock which are beyond the realm of control of the White House and the Federal Reserve. If the stock market fails while Trump is in office, he could fumble for a cause to explain why the dip is not caused by his policies.

The President is under no such apprehensions. He is confident that the passage of the tax bill will provide a positive impetus to stocks. Corporations will enjoy another wave of profits. A majority of analysts believe the same. These positive outcomes will keep the US economy stronger in the near future.

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