Trump vs. Obama

Like most things these days, Libs refuse to acknowledge that the booming “Trump economy” exists. Invariably any lauding of Trump’s economic or stock market successes elicits the response that Trump has benefitted from Obama’s head start. Is his true? Has Trump been piggybacking on the Obama recovery? Opinions vary ... but here are the facts:

Dow Jones Industrial Average

Day Obama Elected  —  9323
Day Trump Elected — 17,888

Day Obama Inaugurated  — 7550
Day Trump Inaugurated —  19,827

Today.   29,423


Percentage Increases

Trump Election Day till now — 64.5% (over 3+ years)
Obama Election Day till Trump Election Day — 91.9% (over 8 years)

Clearly, so far Trump is ahead (assuming his recovery continues ... which, given the coronavirus outbreak, may be in jeopardy.) Comparing these stock market records deserves acknowledgement of some contributing and detracting factors:

- Obama benefitted from the Fed injecting $3.7 trillion into the money supply and reducing interest rates to near zero. (monetary stimulus)
- Obama benefitted from $10 trillion of deficit spending (front-end loaded fiscal stimulus)
- Trump has also deficit spent about $3 trillion (much used to rebuild the military)
- Trump has had the Fed reduce the money supply by about $400 billion
- The Fed has increased interest rates by 1.5 percentage points under Trump
- Trumps has increased GDP growth by about one percentage point and reduced unemployment rates by about 1.2 percentage points despite substantial headwinds from his trade wars with China, Canada and Mexico. He has also expanded average worker’s salaries to over 3% annually. and, finally, started the employment participation rate growing again.

We report. you decide.

Afterwards: Interestingly, the DJIA peak under Bush was 14,000 ... right before the Barney Frank induced sub-prime mortgage crisis. Counting from this high, Obama only experienced the stock market expanding by 28.8%.

Scaremongers

There is an interesting bit of mathematical hocus-pocus currently making the investment rounds … comparing the U.S. stock market’s pattern today with that in 1928-29 ... the run-up to the stock-market panic and the great depression.  Here is the article in question (WSJ Marketwatch Story) and the chart that is used there to prove this (false) premise.  I have taken the liberty of reproducing its chart here in case you don’t want to follow the link: 

 

(Click to Enlarge)

The fallacy of this scary parallel is that it compares these two market moves on an absolute terms not on a percentage-change basis.  That is ... the chart-line for 1928-29 goes from around 200 on the Dow Jones Industrial Average (DJIA) to its peak of around 380 … a 90% move. The chart line for the current DJIA goes from around 12400 to peak around 16400 … a 32% move. In other words, to be truly comparable, the current market would have to reach 23560 on the DJIA (a 90% increase from 12400) to have a comparable percentage move as right before Black Tuesday in October, 1929. Thus we are over 7,100 points below where we would be if this DJIA frothy comparison were indeed valid.

I am quite surprised that the Wall Street Journal and Mark Herbert, et alia would make such a silly mathematical faux pas.  To present a valid graphic comparison between these two periods, Mr. Herbert should have plotted these two lines on a logarithmic scale which would have made the percentage movements equivalent.  I can't help but wonder why such scaremongering is afoot. Perhaps some of the hedge-fund money managers repeating this breathless warning had missed out on the market move last year and would like to have another shot at things?

Caveat emptor ... just because Herbert's DJIA analysis is flawed does not mean that the stock market is not due for a correction ... it is, after all, very often driven by emotion and not logic (just like our political system.)