MacroscopeWith his trade policy unravelling and political change on the cards, Trump’s best stock market days are behind him
- Nicholas Spiro says recent stock market routs have come at a bad time for Donald Trump, who has linked the success of his administration to the S&P 500 index
- However his party does in the midterm elections, it is unlikely to put the brakes on his populist economic agenda
Until this week, US President Donald Trump had enjoyed a good run with the financial markets.
The benchmark S&P 500 stock index, which Trump uses as a gauge of the success of his administration’s policies, had risen 17 per cent, in contrast to a 3 per cent fall in the pan-European Stoxx 600 index and a 5 per cent rise in the MSCI Emerging Markets index.
Even in the bond markets, which are sensitive to an increasingly hawkish Federal Reserve and its tightening of financial conditions, the yield on 10-year Treasury notes has risen sharply this year but remains extremely low by historical standards. In the corporate debt markets, spreads on high-yield debt, or junk bonds, have shrunk this year.
With the US’ crucial midterm congressional elections less than a fortnight away, Trump will be heartened by a report, due out on Friday, that is expected to show the US economy has just enjoyed its best back-to-back quarters of growth since 2014: GDP growth at 4.2 per cent in the second quarter, followed by a likely 3.4 per cent in the third quarter.