During his first term in office, Donald Trump’s approach to stock markets was characterised by his pro-business stance and an emphasis on deregulation. Tax cuts, reduced regulation and stimulatory policy were all actions that he claimed would boost stock market performance and he frequently cited rising stock markets as evidence of his administration’s success. In 2018 he claimed: “The reason our stock market is so successful is because of me” and then warned in 2019 that should he lose the next election, markets would crash. So, what will the President make of current weakness, with the S&P500 down by nearly 10% since the mid-February peak, and now below the level seen in the days before the November election?
This is the question that has been exercising investors, with the ‘Trump put’ just one of the things they have been discussing. This refers to the perception that the President will intervene to support financial markets during periods of economic uncertainty. The belief in the Trump put previously seemed to lead markets to rebound quickly after downturns, as further tax cuts or promises of infrastructure spending boosted investor confidence. The term encapsulated the idea that Trump would prioritise market stability, potentially at the expense of long-term economic health.
Many argued that the belief in the Trump put encouraged riskier investor behaviour, but fundamentally it offers us a genuine debate about the role of government in markets, and whether policymakers should intervene to support asset prices, or allow them to self-correct. For now, things might not be bad enough for Trump to act, but it seems unlikely that his approach to market performance will have changed that much, and it might yet be that the Trump put rides to the US market’s rescue once again.
The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
