What a week it’s been for Americans invested in the stock market. Last week the Dow Jones traveled more than 22,000 points over just the course of a week, resulting in price volatility we haven’t seen in years and suddenly shaking everyone out of the laid-back seemingly ‘growth-without-end’ environment we’ve been accustomed to recently.
The complex and multifaceted economics aside, it is also worth noting how the market’s turmoil naturally soon became a part of the daily tornado in our national political discourse as well.
The rising stock market, which has soared since election day, has been one of President Trump’s most touted talking points amid the other positive macroeconomic trends in employment, consumer optimism, and growth.
It is indeed true that over this past year, pro-growth regulatory and legislative policies coming from D.C. have created a more nimble environment for businesses, whether large or small, to operate in, and contributed to increased business profitability and thus stock gains.
Despite this week’s volatility, the fundamentals point to more positive indicators on the horizon, with economic growth looking optimistic and companies continuing to drive jobs and innovation in this environment, such as with Apple’s recent announcement that it would be investing over $350 billion in the United States over the next five-years.
This seemingly endless parade of positive economic news came to a brief halt last week as the floor suddenly fell out from markets. Many on the left quickly took this opportunity to mock the President and Congressional Republicans for this turn of events, with the President himself even taking to Twitter to denounce the seeming irrationality of the stock market’s sudden decline.
While the debate over the stock market has been a persistent knot throughout the first year of Trump’s Presidency, with many critics saying that much of the market’s current momentum is attributable to President Obama’s work, this week’s sudden turn of events sheds light on the complex relationship between politics and economics.
Year after year, polls repeatedly show that the economy ranks in as either the top or second most important issue Americans are concerned about. As James Carville famously said as a strategist for then-candidate Bill Clinton in 1992, “It’s the economy, stupid!”
It is therefore natural for politicians to claim credit for positive economic developments and to try to shift the blame when the trends are negative. We see this time and time again, whether in the years of pointing fingers after the financial crisis, the attribution battles over the 1990’s tech boom, or in the ever-present yet difficult-to-prove assertions that growth could have been faster or slower under a different set of policies.
The facts usually are far more complicated than the simple “before and after” comparisons that are the standard boilerplate in political ads and flyers. The economy is driven by a multitude of factors ranging from credit and monetary leverage to legal frameworks to changing consumer tastes and tolerances, and even the most hardened and well-compensated mega-fund quants and their algorithms have a tough time predicting developments.
Zooming in a little bit, we quickly see that behind each numerical movement in economic growth are the countless innovators, investors, workers, analysts, and many more who are the ones actually creating the activity that in aggregate results in a move in GDP, job numbers, or company earnings.
That is not to say that our government, and the leaders inhabiting its offices, do not have an enormous role on our economy’s direction. Policies and regulations essentially create the playing field that all of these actors operate in and can very easily accelerate, create, slow down, block, or reverse growth and innovation.
No one knows for certain how the market or economy will develop, even if current projections remain bright. What does remain certain however is that we can always continue to expect, as we saw this past week with Trump and his opponents, economic developments to be rightly or wrongly used as political fodder.
NOTE: "The Conservative Voice" was my nationally syndicated weekly column from 2017 to 2018 printed/distributed by newspapers in dozens of states across the country. It offered conservative analysis of modern political, social, economic, and cultural issues. The 2017-2018 blogs in this section were part of "The Conservative Voice."