Trump's threat of market crash


Donald John Trump, the 45th President of United States of America (USA) and current incumbent, is maverick in nature and behaviour.

Donald John Trump, the 45th President of United States of America (USA) and current incumbent, is maverick in nature and behaviour.

The billionaire business-turned-unconventional politician took to Twitter, his usual platform to reveal everything official, a couple of days ago to sound 'a warning signal' to investors and American people that stock markets will crash to historic lows if he is not voted to power in 2020 for a second term.

"The Trump Economy is setting records and has a long way up to go. However, if anyone but me takes over in 2020, there will be a Market Crash the likes of which has not been seen before!" Trumped announced on his Twitter handle, drawing criticism from many quarters.

It's a fact that the US economy turned buoyant and growth picked up after Trump triumphed and assumed charge as US President in 2016. This led to upswing in stock market indices.

Statistics reveal that under Trump, the key stock market benchmarks like S&P 500 climbed up by 21.4 per cent, the Dow Jones Industrials Average up by 25.2 per cent and tech-heavy Nasdaq by 34.2 per cent.

But that doesn't mean that markets will crash if he loses the electoral battle. Multiple factors influence voting pattern. Stock markets are among them. Therefore, Trump's announcement is nothing short of blackmailing voters.

However, it is not first time that Trump talked about his importance when it came to stock markets. In February this year, he went on to say that stock markets would have declined by at least 10,000 points had the Opposition (read Hillary Clinton) won the 2016 election.

He also claimed that markets would have logged much higher upswing under him if Federal Reserve, the US central bank, had not raised interest rates four times in 2018.

But it doesn't mean that governments don't have any role in the way stock markets behave. They do play key role. A stable government and continuity in governance always result in decent dividends for stock market investors.

Indian markets turned bullish after the Narendra Modi government retained power in the 2019 elections. The situation may be the same in the US if Trump retains power in 2020. But it depends on how his government performs during the remainder of his tenure before the world's most powerful country goes to elections.

Stock markets clocked record growth levels during the two-term, eight-year presidency of Barack Obama, Trump's predecessor. According to the data, the S&P scaled by 56.4 per cent, Dow up by 50.6 per cent and Nasdaq, 92.9 per cent during that period. Trump is only into the third year of his first term now.

It's too early to compare the performance of the markets during their tenures. But Trump has a lot of catch-up to do.

The bottom line, however, is that the course that stock markets take in long run depend on the macroeconomic fundamentals prevailing in a country.

Markets perform better irrespective of who is in power if economy sends growth signals. That's most important. US markets will do well so long as that country's economy is in good stead.

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