President Trump loves to brag about how well the U.S. stock market is doing, citing market movements as evidence of how awesome his presidency has been for the economy. On Wednesday, during a Pennsylvania speech and a subsequent interview with Sean Hannity, he touted stock performance again, this time adding the confused claim that equity market increases were tantamount to wiping out our national debt.
There are many reasons that boasting about market movements is boneheaded, including some that have been cited by lots of business journalists (such as Marketplace’s Kai Ryssdal):
- Presidents don’t actually control the “animal spirits” of equity markets
- Equity markets don’t necessarily reflect the underlying health of the economy
- Markets can also go down, making it risky to benchmark your administration’s success to stock prices
There’s another important reason that I haven’t heard mentioned so far: Stock markets may be up — but they’re actually up more in the rest of the developed world than they are here.
As Ryssdal might say, let’s do the numbers.
To track changes in U.S. equities markets, I’m using the S&P 500. This is a broad, market-cap-weighted measure of 500 U.S. equities. For lots of reasons, it’s more representative of the overall U.S. stock market than the 30-company Dow Jones Industrial Average. For example, the Dow is price-weighted, which means a single expensive stock can cause the Dow to have big swings.
For the rest of the developed world, I’m using an exchange-traded fund that tracks the MSCI EAFE Index. This index is made up of large- and mid-capitalization developed market equities in Europe, the Middle East, Asia and the Pacific. It does not include any North American stocks.
Here’s what both of those measures have done since Trump took office on Jan. 20, 2017:
As you can see, the S&P 500 is up 12.5 percent as of Oct. 11. The international index ETF is up 16.6 percent.
Trump, of course, prefers to benchmark markets going back to Election Day, since the gains have been greater over a longer time horizon. Fine. Let’s look at what’s happened since then.
Since Nov. 8, the U.S. market is up 19.4 percent. Markets elsewhere, 20.4 percent.
If Trump’s economic platform is really single-handedly responsible for stock market gains, it’s hard to explain why it would benefit the rest of the developed world more than it benefits us. Especially if you adopt Trump’s “America First” view of the global economy as essentially zero-sum.
The point isn’t that U.S. equities are doing badly. They’re doing well. We’re in a bull market that long, long predates this administration. Given that plus the global context, it’s dangerous and dumb for Trump to take credit.