Wednesday, September 11, 2019

President Trump hopes to get re-elected in 2020

We have the election in a little more than a year and to be re-elected, he [Trump] has to show a strong economy and not a recession in the US. 

The US is an asset driven economy. We have an unusual situation in most western equity markets, .... where it is not the economy that drives the stock market but it is the stock market that drives the economy. If the stock market goes up, the economy has performed okay, if stocks drop 10-20%, we will have recession. We are not down 10% from the peak though we are down modestly. 

So Trump is very conscious about the stock market and he believes that the Federal Reserve by cutting rates could essentially boost equity prices. I am not so sure about that because the equity market nowadays looks at different factors than just monetary factors. If you just looked at monetary factors, the Japanese Nikkei should be the strongest stock market in the world and it is not or European markets that have had negative interest rates for a very long time, should be the strongest markets but they are not.

via economictimes