WASHINGTON ― Retirees in a good mood about their portfolios based on Donald Trump’s latest stock market boasts should probably avoid looking at their actual statements.
The president’s tariff wars with much of the world have translated into basically flat growth in stock index fund-based retirement accounts over the past two years.
“It’s pretty much all about the trade war,” said Nariman Behravesh, chief economist at IHS Markit. “Escalating tensions lead to a falling market and vice versa. The level of trade policy uncertainty has surged since the beginning of 2018.”
Despite the president’s claims of “record territory” numbers for the S&P 500 index, it increased just 150 points between January 2018, when Trump’s much-touted tax cuts started taking effect, and the closing bell on Friday ― an annual growth rate of just 2.9%, or barely ahead of inflation, according to a HuffPost analysis.
“It’s basically gone sideways for the past two years,” said Mark Zandi, chief economist at Moody’s Analytics. “The trade war has done significant economic damage.”
“He better hope people don’t look at their 401(k)s, because they haven’t made any money in two years,” said Rick Tyler, a Republican consultant and longtime Trump critic. “They’ve been doing pitifully.”
As is frequently the case with Trump, though, the reality of a situation does not appear to factor heavily into his statements.
“I guess we’re in record territory for stock,” Trump said Monday at Joint Base Andrews in Maryland before climbing aboard Air Force One. “That’s great for 401(k)s. That’s great for everything.”
“It was just announced as I was getting off the plane that the S&P has hit an all-time high, the highest in the history of our country, and that’s not for rich people, that’s for everybody,” Trump said a short time later at a speech in Chicago, where he asked audience members who had a 401(k) retirement account that had increased to raise their hands. “They are up 70%, 80%.”
In fact, the S&P 500 ― an index that tracks the 500 largest publicly traded companies in the country ― has increased only 40% since Trump’s election, the benchmark he and his supporters like to cite.
The vast majority of that increase took place between Election Day and September 2018, when Trump’s trade war started hurting farmers and manufacturers more acutely. Between then and last week, the S&P 500 did not show a net gain of even 100 points.
The White House did not respond to HuffPost queries regarding Trump’s false claims about the stock market.
Stephen Moore, a “supply-side” economist who advised the Trump campaign and whom Trump briefly considered for a Federal Reserve Board appointment, agreed that the trade war has been a drag on the stock market and the economy generally. “The United States is the hub of the world trading system, and every other country is a spoke,” he said. “It affects everybody.”
Notwithstanding the stock market’s recent flatness, though, Moore said Trump had every right to brag about the initial gains. “Of course Trump should be thumping his chest. When we elected a pro-business president, the stock market went through the roof.”
Measuring from Trump’s election through Friday, the S&P 500 has increased an average 11.4% annually ― a rate that is virtually identical to the 11.3% average increase under President Barack Obama from his election in November 2008 through November 2016.
One major difference between the two: Obama took office as the economy was still sliding into a deep recession, while Trump inherited a relatively strong economy.
Moore said he could not explain the stock market’s growth under Obama.
Andrew Bates, a spokesman for the 2020 presidential campaign of Vice President Joe Biden, said the weak performance of the market under Trump is telling.
“He inherited powerful economic growth from the Obama-Biden Administration, the same way he attained everything else in his life, and now he’s squandering it,” Bates said in an email. “Hiring just hit a seven-year low, fewer people are getting pay raises, and manufacturing is in a recession as the damage from his reckless trade war slams into workers, farmers, small businesses, and consumers.”
Jared Bernstein, once Biden’s top economist in the vice president’s office, said one clear effect of Trump’s trade war has been volatility based on the latest speculation regarding potential agreements to end the tariffs or the imposition of new ones.
From Sept. 16, 2018, to Dec. 16, 2018, for example, the S&P 500 dropped 513 points, or 18%.
“Trump can still move markets based on whatever nonsense he’s spouting regarding the trade war, but I would hope at some point that traders realize there’s no information there,” Bernstein said.
Trump’s statements about the stock market are also “nonsense,” according to his critics, but they are designed for a different audience.
“Trump knows his people have a very, very willing suspension of disbelief,” said Rick Wilson, a Republican consultant who has opposed Trump since the start of the GOP primary campaign in 2015.
“He believes his supporters are suckers,” said Joe Walsh, a former Illinois congressman who is now running against Trump for the 2020 Republican nomination. “And he believes they’ll believe him when he says he’s built miles of new wall. And he believes they’ll believe him when he says he’s got the best health care plan ever.”