There appear to be three major reason for Wednesday’s record one-day market rally in which the Dow Jones Industrial Average rose 1,086 points, or nearly 5 percent (the S&P 500 and the Nasdaq indexes had their best day in three years). In part it was simply a rebound from Monday’s huge stock market drop. It also was influenced by strong preliminary holiday retail sales numbers. And finally, it reflected relief at reassurances from Trump economic adviser Kevin Hassett that the boss wasn’t going to fire Treasury Secretary Steven Mnuchin and also wasn’t going to figure out some way to defenestrate Fed chairman Jerome Powell (whom he cannot fire).
Economic policy instability is poison to investors, and Trump has arguably generated a lot more of that than any president since Richard Nixon launched wage and price controls. But sickening plunges in markets do tend to produce giddy recoveries, over the short term at least. And it’s ironic but somehow fitting that Mnuchin helped produce the Christmas Eve jitters with a strange and unsettling series of calls to bank CEOs, and then calmed them down by keeping his job. Powell did nothing but stay out of sight.
Longer-term market prospects are quite uncertain, given concerns over global growth patterns, monetary policy, trade wars, and the improbability of a ten-year bull market lasting perpetually. But short-term gyrations seem less and less uncommon. The president will probably take credit for this latest market jump after he tried to jawbone away the last plunge. Per the Washington Post:
Trump tried to create his own White House rally on Christmas Day when he suggested that the pullback in U.S. stock markets is a good buying opportunity for investors.
“We have companies — the greatest in the world, and they’re doing really well,” Trump told reporters at the White House. “They have record kinds of numbers. So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.”
Nobody can spin like Donald Trump, even when he’s spinning himself.