Monday, March 27, 2017

The Trump Placebo

A friend showed The Omnivore this conversation from Facebook:

The writer is, obviously, a Trump-voter who wants the Omni-Friend, Michael, to lighten up and enjoy the MAGA-ing. Is Trump MAGA-ing? Already? If so, how much? If not? How would we know?

Let's see.

1. Trump Voters / Republicans Certainly Think Things Are Getting Better

Gallup tracks how Americans feel about the current economic conditions and their guesses about the future. This is how it looks post-election:

The climb is from Republicans and independents--Democrats felt less optimistic about the future by 13pts (a big decline). From a December poll:

The Omnivore will note that we've been through this before with Obama--in the reverse. So is this just good feelings? Or is something really happening?

2. The Numbers - Who Believes Them?

Republicans will have an awkward advantage here: now that Trump is in the White House they feel okay to "believe the numbers" (particularly unemployment figures)--and so will Democrats, having believed them all along. The reason this is awkward is that if the numbers are "okay" today and were "okay" this time last year--then Trump-supporters should have to acknowledge that the active ingredient probably wasn't Trump.

So . . .  Jobs!

3. The Jobs President

Trump takes a lot of vocal credit for saving American jobs. What does the Jobs picture look like since Trump took office? Since we can now use government statistics, The Omnivore will go to the Bureau of Labor Statistics.

How is employment doing?
Unemployment has been falling since 2008. By February it's . . . doing okay.
How about changes in "real hourly wages" for private employees? There's no Trump effect here either. Ah, but how about Labor-Force Participation?
Labor-Force participation has dropped and it increased slightly at the end of the year back to where it was around 2014. If you didn't like it in 2014, why is it okay now? Right: Trump.

Take-Away: Trump may be increasing optimism in the labor situation--but he isn't having an impact yet. A lot of Obama voters felt rosy about the economy after he was elected. How'd that work out for them?

Well, how did it?

4. The Bull-Market President!

This is the S&P adjusted for inflation:
That last gray line is the 2008 collapse followed by the election of Obama. If you were invested in the stock market, under Obama, you did great! It is worth noting that right now some stock market watchers are nervous because:

  • The market is on an 11 year winning-spree. That means, statistically, it's time for a bear.
  • The market is very susceptible to nerves. If Trump encounters a real crisis and fumbles it, it could crash.

5. The Trump Real Estate Market

Here's existing home-sales, vs. new-home sales:
Things are doing okay here with steady rises since 2011. Okay!

The Truth: Nothing's Happened Yet

Trump may be great for the economy or he may be a disaster--we won't know for at least a year. In The Omnivore's own job-area, the financial sector, we believe that he will de-regulate banking which will be good for us--but potentially bad for you. However, our view is that (a) anything that is intended to happen will take around 2 years to develop and have an impact and (b) no one--not even us--want to go back to 2008 rules. Despite what Bernie Sanders voters tell you, the banking system did not intend to crash the economy and we don't think we'd survive the same conditions a second time.

One other thing: If Trump is the economics president, he's come in the worst possible package. Trump's initial foray into the healthcare markets sparked fears of a crash (which recovered after he fumbled the ball completely). Ryan's plan wasn't the proximate cause--it was the chaos and uncertainty that Trump projected.

This has also had impacts on things like the Municipal Bond Markets (loss of 5bn to investors, largely due to uncertainty) and US Treasuries. If Trump can create his 1T infrastructure program, keep inflation to a minimum, and continue to hold the unemployment rate low while letting labor-force participation increase (the retiring boomers will work against that, however), confidence and stability will increase.

On the other hand, if he continues to create international discord with allies, fumble legislative initiatives, and can't shake the Russia-scandal then he is going to look like a chaos agent instead of a growth president.

1 comment:

  1. Hard to visualize him doing much in the way of the positive "if he can..." stuff. His economic policies/plans are almost completely at odds with themselves. Stunning (and disturbing) that he can't understand this.