Trump enters 2020 on a bull market high

President Trump is entering 2020 on a Wall Street high, boasting strong stock market numbers that he hopes will buoy his political prospects entering a reelection year.

Tuesday marks the final day of trading for 2019, and both the S&P 500 and Dow Jones indices are poised to finish the year with significant gains. The Dow is up about 22 percent from a year ago, and the S&P is up just over 28 percent in that span as of the closing bell on Monday.

Analysts said that some of 2019’s stock market gains are a rebound from a decline in stock prices at the end of the year but that the stock market is still ending 2019 at a level above 2018’s peak and there haven’t been any major corrections this year.

“It was a great year, as far as market performance is concerned,” said Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.

The Washington Post reported Saturday that the Dow Jones gains in Trump’s time in office so far lag the gains in the same time periods of Bill Clinton’s and Barack Obama’s administrations, but they exceed gains made during other recent presidencies. The rise in the Clinton era coincided with a tech boom, while the rise in the Obama years came after a financial crisis that saw markets hitting a low point at the beginning of his administration.

Trump claimed during a recent trip to London for a NATO gathering that he doesn’t pay attention to the stock market and prefers to watch job numbers. But the president’s Twitter feed indicates otherwise.

He has tweeted a dozen times in December alone about the state of the stock market, touting each new record high in an effort to connect the boost in numbers to his time in office.

“New Stock Market high!” Trump tweeted Dec. 16. “I will never get bored of telling you that — and we will never get tired of winning!”

Trump has reason to be bullish. Talk of a looming recession was prevalent over the summer, but the economy has continued to add jobs and markets have remained strong, bolstered in recent weeks by the announcement of a phase one trade agreement between the U.S. and China.

Trump’s reelection hopes are tied closely to the economy’s health. Public polling has shown Trump earning higher marks on his handling of the economy than on other aspects of his job performance.

But there are risks to Trump making the stock market such a prominent part of his messaging given its volatility and the president’s unpredictability and his proclivity for imposing tariffs and negotiating via tweet.

“A lot of Trump voters say they don’t like his tweets or his temperament but they love the economic results,” said Alex Conant, a GOP strategist who worked on Sen. Marco Rubio’s (R-Fla.) 2016 presidential campaign.

“It’s really helped support his poll numbers despite all the other controversies,” Conant said. “So if the economy were to suddenly slow down or the market crashed, there’s no doubt it would have a really damaging impact on Trump’s reelection prospects.”

At times during the year when the stock market saw declines, Trump sought to avoid responsibility, placing blame on Federal Reserve Chairman Jerome Powell and Democrats’ efforts to impeach him. 

In addition to the stock market, there are other economic data points that bode well for Trump. The unemployment rate is low and the economy keeps adding jobs, a sign that people are reentering the labor market. And the Federal Reserve Bank of Atlanta recently published data finding that wage growth is fastest among those with wages in the bottom 25 percent.

Gross domestic product (GDP) is forecast to grow at a slower rate in 2019 than it did in 2018. But some of Wall Street’s fears earlier this year of a recession have subsided.

Several recent polls show that voters have a favorable view of the economy. But it’s unclear if those positive feelings will translate to an electoral victory for Trump in 2020.

Polls consistently find that more people disapprove of Trump’s overall job performance than approve of it. And voters’ opinions about Trump are fairly set, meaning even a strong economy is unlikely to move large swaths of Democrats to vote for the president.

A poll conducted by the Financial Times and the Peter G. Peterson Foundation last month found that only about one-third of likely voters nationwide said they are better off financially since Trump became president. Roughly an equal percentage of respondents said they are worse off financially. In battleground states, 37 percent said they are better off, and 32 percent said they are worse off.

Democrats point out that most of the value of the stock market is held by high-income people. According to a 2017 paper by New York University economics professor Edward Wolff, 84 percent of the value of stocks, held directly or indirectly, are controlled by the wealthiest 10 percent of households.

“One of the most important things to realize is that the stock market tells you very little about how people in the bottom half of the income scale are doing,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities. 

At the Democratic presidential debate in California earlier this month, candidates argued that even though the stock market and economic growth are solid, middle-class families don’t feel like they are doing better because they have trouble covering expenses.

“Where I live folks aren’t measuring the economy by how the Dow Jones is looking, they’re measuring the economy by how they’re doing,” South Bend, Ind., Mayor Pete Buttigieg (D), one of the four highest-polling candidates, said at the debate.

“We need an economy that works for working families, not just the 1 percent,” said Sen. Bernie Sanders (I-Vt.), another high-polling Democratic candidate.

Bernstein — who was an economic aide to Joe Biden while he was vice president but isn’t working on any presidential campaign — said that he thinks the Democratic candidates’ messages will be effective and Trump’s message won’t resonate.

“When you’re in an age of high economic inequality, touting aggregate statistics like GDP and the stock market don’t reflect the typical household’s experience, and in that sense, it’s not an effective message,” Bernstein said.

Right-leaning analysts and Trump allies, however, don’t think Democrats’ claims that the middle class aren’t feeling economic gains will be effective.

Tim Murtaugh, the communications director for the Trump campaign, highlighted a recent Quinnipiac Poll that found nearly 75 percent of those surveyed believe the economy is either excellent or good.

He cited the Atlanta Fed study showing rising wages for low-income workers, consistently low unemployment rates and widespread job availability as indicators that the Trump economy is built to survive beyond a stock market high.

“So the Democrats are left to fall back on their old saw of saying it only benefits the rich,” Murtaugh said.

Experts cautioned that the stock market can be volatile and is often influenced by events outside the president’s control. Even if the strong market endures leading up to election day, it may not be enough if other economic factors lag.

Mark Zandi, chief economist at Moody’s Analytics, said the economies in swing states like Wisconsin, Pennsylvania and Michigan — where a strong stock market matters less than the effects of Trump’s trade wars or the state of manufacturing jobs — will be critical come next November.

“Stock prices go up and they go down and they go all around,” Zandi said. “There’s a lot of script to be written between now and Election Day.”