WASHINGTON ANALYST SAYS: FACTORS THAT ARE SPOOKING INVESTORS ARE ALL NEGATIVE

This president’s tweets are spooking world investors

Trump falsely says billions of dollars are coming to the US from other countries.

It is appearing that Trump’s lies have finally caused a severe response of the dive of the Dow Jones industrial stock average of 799 points, and it was all based on Trump’s statements on China.

The Dow Jones drop was joined by Standard & Poors stock index that fell 3.2% and NASDAQ dropped 3.8%.

US stock markets cratered due to investor skepticism of Trump’s comments of saying that he and Chinese President Xi Jinping had reached an “incredible deal” to temporarily suspend his trade war. 

However, there has been no statements from China about any “incredible deal”.  In fact, there has been absolutely no comment at all about anything coming from the US-China Argentine steak dinner. (Trump & Xi met for dinner at the G20 Meeting.)

Once again, world leaders, US lawmakers and millions of jittery investors have been reminded that Trump’s words cannot be trusted.

This occurred just as Trump had proposed stripping away electric-car subsidies from General Motors as punishment for the automotive giant moving to cease production at plants in the United States and Canada.  But afterwards, his chief economic adviser, Larry Kudlow, said the White House would do no such thing because targeting a single automotive company would be illegal.

But this week, the president routinely said that China and other countries are paying billions of dollars to the United States because of his tariffs.  That is totally false. Tariffs are paid by companies, often US firms, that import foreign-made products.

Global markets demand consistency and reliability.  However, President Trump never offers either.  He instead makes knee-jerk announcements that surprise the investors and the lawmakers, even some of his own aides and advisers sometimes find themselves reversing course depending on this president’s whims.

“The words are noisy, but markets can’t wear noise-canceling headphones,” said Diane Swonk, chief economist at Grant Thornton. “You can’t delineate the noise from policy because sometimes the noise is policy.  Markets like certainty. They need to know the rules of the road, whatever they are, in order to move forward.

The lack of confidence in Trump’s proclamations goes well beyond the US economy.  This week, some US Senators demanded a CIA briefing because they did not trust Trump’s statement questioning whether Saudi Crown Prince Mohammed bin Salman (MBS) had ordered the brutal murder of a Post journalist, Jamal Khashoggi.

Afterward, Senators Lindsey Graham (R-S.C.) and Bob Corker (R-TN) said the CIA’s intelligence briefing was indisputable that the Saudi leader had ordered the killing.  This totally defied Trump’s statement that “maybe the crown prince was involved, and maybe he wasn’t, [MBS] says he wasn’t”.  But the senators reaffirmed their desire to punish the Saudi kingdom.  Per the CIA's briefing, the Senators accused the Saudi crown prince of ordering the Khashoggi murder.

There are increased signs that investors, after hanging on to those signals from Trump and his advisers about the status of economic planning, they are now backing down.  They are instead beginning to understand that many of Trump’s statements lack any real substance, even when the Treasury Secretary, Steven Mnuchin, tried to explain to the reporters outside the White House.

Rep. Bill Pascrell Jr., the top New Jersey Democrat on the House Ways and Means trade subcommittee, criticized Trump for an “unpredictable and chaotic” approach to trade issues that has “no rhyme and reason, and seemingly only on the whims of the president.”

“One hand doesn’t know what the other is doing. If neither investors or the public or even members of Congress know what this administration is doing, swings like this can’t be surprising,” Pascrell said, referring to the Dow stock drop. “Chaos breeds chaos.”

Trump’s aides have described the president as being obsessed with the stock market’s performance.  Early on, Trump ignorantly saw the good stock performance as a validation of his personal performance as president.  Because of that attitude, Trump spent much of 2017 and early 2018 cheering the big stock gains, which he claimed were stimulated by his presidency.  In particular, his personal moves to cut taxes and roll back regulations.  That's a bunch of Bull!

The markets have moved wildly over the past two months, mainly because of Trump’s erratic policy pronouncements.  This pattern now seems to worsen when the economy is showing signs of future weakness.  Of course, Trump never takes credit for those negative stock market changes, only when the market is up.

The US outlook has actually gotten cloudier because of Trump’s statements. Numerous analysts now predict that economic growth will slow next year, with interest rates rising and the deficit continuing to expand under President Trump's presidency.

Trump often makes off-the-cuff and usually inaccurate statements related to the economy.  This week, Trump wrote in a tweet blasting GM for its plant closures and layoffs and that BMW had “just announced a major new plant. The U.S.A. is booming!”

That was false. BMW has made no such announcement. In response to questions, BMW said it was considering building a new plant in the United States at some point in the future, but the German auto manufacturer said it had made no decisions yet.

Analysts attributed the latest downward market jolt to the uncertainty about the non-results of Trump’s dinner with Xi Jinping in Buenos Aires.  This was on the sidelines of the Group of 20 summit.  Since the dinner, US and Chinese officials have publicly disagreed over several substantive trade points.

Chinese officials did not confirm the White House’s initial claims that China had agreed to buy large amounts of US agricultural products and remove tariffs on US automobiles. Kudlow later said there was not an actual agreement for China to remove auto tariffs.  He did say that he expected Beijing to eventually do it as a show of good faith.  But adding to the confusion, Trumps thumbs then sent tweets threatening import penalties on Chinese products.

The real reason for the overall confusion is the lack of the usual formal document or agreement from both China and the United States detailing their progress.  Nothing has come from China…..absolutely nothing…zip…total silence.  This is not a normal way of responding and the stock market dive proved the point of China’s silence, and Trump’s false tweets.

Brian Gardner, director of Washington research at Keefe, Bruyette & Woods, said three factors are conspiring to spook the investors: 1: confusion over what was accomplished at the Buenos Aires dinner, 2: Trump’s “Tariff Man” tweet that suggests his administration’s trade hawks may be the culprit, and 3: signs of a possible coming recession.

“Individually, those are all negatives,” Gardner said. “Collectively, it’s an unholy trinity, and [with Trump's tweets] that’s what we have today.”

Hear, Hear Mr. Gardner.

Copyright G. Ater 2018