Photo by Karine Germain
When he was elected last fall, Donald Trump was the darling of the business community. He promised to get rid of pesky regulations that protect consumers from fraudulent business practices. His sidekick, Elon Musk, even pledged to “delete” the Consumer Financial Protection Bureau.
Trump also promised to get rid of annoying environmental regulations. If companies want to put cancer-causing substances in people’s food, air, and water, his administration would not stand in their way.
Trump also promised to be firmly on the side of management in dealing with workers. Just as he had made a practice of ripping off workers in his business dealings, he was committed to extending this opportunity to employers across the country.
Business leaders didn’t care if Trump lived largely in a fantasy world where global warming isn’t happening and he won the 2020 election. Nor did it matter to them that Trump was committed to using the power of the government to punish the people he considers enemies.
None of this mattered. Trump promised big tax cuts and to use the government to strengthen business’s hand at every opportunity.
But the world seems to have changed. Despite Trump’s pledge to turn the government over to the corporate world, the financial markets seem unhappy. Since Trump took office in January, the S&P 500 is down a bit more than 3.0 percent.
The index plummeted by more than 12 percent following Trump’s announcement of his “Liberation Day” tariffs, although it regained most of this ground after he reversed course a week later. It started to dip again in May, as Trump’s 154 percent tariff on imports from China was bringing trade to a halt. He then reversed course again and left his taxes at a still very high (but not completely prohibitive) 30 percent.
That calmed the markets, but they got angry again at the prospect of a big increase in the deficits associated with Trump’s tax cuts, which led to a ratings downgrade by Moody’s. It probably doesn’t help matters that Trump’s press secretary, Karoline Leavitt, insists that Trump’s tax cuts will reduce the deficit.
And it’s not just the stock market, the dollar is down by almost 10 percent against the euro since Trump took office. And interest rates on long-term government bonds have been jumping. Unlike the fall in the stock market, the rise in interest rates will have very real effects on the economy if it is not soon reversed, since it will further slow housing construction and home sales.
I will be the last person to attribute great wisdom to financial markets. I remember stocks like Pets.com and Priceline.com hitting market capitalizations in the tens of billions in the late 1990s. I also remember the wizards of Wall Street sending the stock price of investment banks soaring as they mass produced mortgage-backed securities based on subprime mortgages that soon became nearly worthless.
Markets can be very wrong, but one thing they are definitely right about is the sentiment of investors, and right now that sentiment looks pretty damn negative. Trump can spin endless nonsense to the media and his supporters, but for now at least investors aren’t buying it.
As much as Trump seems to want to do everything to increase corporate profits at the expense of everyone and everything else, Wall Street investors seem to think his incompetence will outweigh his intentions when it comes to their future profits. Given what we have seen from his administration in its four months, it would be hard to argue with the financial markets on this one.
This first appeared on Dean Baker’s Beat the Press blog.
The post Mad Money: Why the Markets are Angry at Trump appeared first on CounterPunch.org.