Live by the Dow, Die by the Dow? Trump Is Quiet on Market

President Trump regularly takes credit for the stock market rising. Will he take the blame as it falls? And should he?

WASHINGTON — As President Trump boasted about the economy during a speech on Monday, he left out one of his favorite lines. Nowhere did he mention the skyrocketing stock market.

Viewers at home understood why. In the corner of their television screens, a graphic showed the Dow Jones industrial average seemingly in free fall — down 500 points, down 600, down 800, down 1,000.

By the time a bullish Mr. Trump was done speaking in Blue Ash, Ohio, the bearish market had plunged by nearly 1,600 points before recovering somewhat to close 1,175 points down.

No president in modern times has connected his political fortunes to the stock market as much as Mr. Trump, who relentlessly cited its meteoric rise as a sign of his success at restoring confidence in the American economy. But the drastic sell-off on Friday and Monday demonstrated why most presidents scrupulously avoid talking about short-term gyrations in share prices: If you live by the Dow, you may die by the Dow.

Barely a week went by last year when Mr. Trump did not crow about the rising market, making it a major talking point for his case to the country that he had made a difference. He took credit for the market at least 25 times in January alone. Even when the Dow fell 363 points on the day of his State of the Union address last week, Mr. Trump simply ignored the drop and talked about how the market had “smashed one record after another” since his election.

Despite the stumble of the past two trading sessions — totaling 1,841 points, or 7 percent — the Dow remains far higher under Mr. Trump, and there is no sign that the broader economy has lost momentum. But critics who have chafed at what they considered the president’s shortsighted boasting for the past year saw Monday’s meltdown as overdue comeuppance and eagerly piled on.

“Good time to recall that in the previous administration, we NEVER boasted about the stock market — even though the Dow more than doubled on Obama’s watch — because we knew two things: 1) the stock market is not the economy; and 2) if you claim the rise, you own the fall,” Jay Carney, a White House press secretary for President Barack Obama, wrote on Twitter.

Credit...Brendan McDermid/Reuters

It would be an exaggeration to say that Mr. Obama never trumpeted the market’s performance — “the stock market is booming,” he said in 2014, a few days after boasting, “I don’t have to tell you about the stock market and where that’s gone.” But it was rare enough that it stood out. Likewise, Presidents Bill Clinton and George W. Bush made a point of generally avoiding public commentary on short-term market movements.

After Monday’s tumble, Mr. Trump’s aides were left in the awkward position of ignoring it or explaining that it was not especially meaningful. Treasury Secretary Steven Mnuchin, who accompanied Mr. Trump to Ohio, declined to comment on the market when he encountered reporters on Air Force One during the trip back to Washington and again on the tarmac after it landed. The television on the plane was tuned to Fox Business Network as it dissected the day’s dark developments.

“Look, markets do fluctuate in the short term. We all know that,” Raj Shah, a White House spokesman, told reporters en route to Ohio when the market was heading down. “And they do that for number of reasons. But the fundamentals of this economy are very strong and they’re headed in the right direction — for the middle class, in particular.”

After the president returned to the White House, his press secretary, Sarah Huckabee Sanders, issued a written statement.

“The president’s focus is on our long-term economic fundamentals, which remain exceptionally strong, with strengthening U.S. economic growth, historically low unemployment and increasing wages for American workers,” she said. “The president’s tax cuts and regulatory reforms will further enhance the U.S. economy and continue to increase prosperity for the American people.”

Those tax cuts may actually be contributing to the market’s decline. Analysts attributed plummeting share prices to Friday’s job report, which showed wages beginning to rise as the economy nears full employment. Rising wages are a good thing for those who receive them, and for the presidents who seek to stimulate them, but investors see them as a sign of possible inflation and higher interest rates.

Mr. Trump pushed through a $1.5 trillion tax cut plan in December to fuel faster growth despite warnings from economists that the economy did not need the help. The economy is growing slowly by historical standards, but the low level of unemployment suggests that it is also growing about as fast as it can.

Instead of fueling growth, investors worry that the extra money Mr. Trump is pumping into the economy through tax cuts and, if he is successful, with a $1.5 trillion infrastructure plan will inflate wages and prices. And that could prompt the Federal Reserve to raise interest rates more quickly, suppressing growth to keep a lid on inflation.

“Even before the fiscal stimulus plan has really begun to kick in, we are already seeing markets worrying more about inflation,” said Torsten Slok, the chief international economist at Deutsche Bank Securities. “They are coming to the conclusion that the U.S. economy is in danger of overheating.”

Concern about rising deficits may be weighing on financial markets, as well. The federal government, which competes with private investors for available funds, plans to borrow almost $1 trillion this year, a big jump from last year’s total of $519 billion, the Treasury said last week. That is a direct result of the decision to cut taxes without reducing federal spending. Indeed, the administration is now pushing for more spending on defense.

Mr. Trump also decided last year that he would not nominate Janet L. Yellen for a second term as Fed chairwoman. Instead, he nominated Jerome H. Powell, who was sworn into office on Monday as the market opened for business.

Mr. Powell, who had been a Fed governor since 2012, has emphasized continuity. But investors have a long history of anxiety about new Fed chairmen. During Alan Greenspan’s first months in office in 1987, the stock market lost more than 30 percent of its value. And Mr. Powell is a relatively unknown quantity on Wall Street.

Still, some analysts cautioned against overinterpreting the meaning of market movements.

“In many cases, it is near impossible to figure out what moves the stock market in any given day,” said N. Gregory Mankiw, a Harvard University economist and former chairman of the president’s Council of Economic Advisers under Mr. Bush. “The stock market is a leading indicator, albeit an imperfect one. So it is natural to see a rising market as good news. But it is highly speculative to tie a stock market movement to any particular set of policies.”

While the Dow closed at its lowest point in two months, the market remains well above where it was when Mr. Trump was elected. Even with the loss, the Dow is 23 percent higher than on Inauguration Day 2017 and 33 percent higher than on Election Day 2016.

Over all, the 25 percent increase in 2017 was the largest annual rise since 2013, when the Dow shot up by 26.5 percent. Over the eight years of Mr. Obama’s presidency, which began at the depths of a financial crisis and recession, the market rose nearly 150 percent.

After calling attention to the daily running of the bulls for so much of the past year, Mr. Trump chose to focus on other metrics on Monday at a manufacturing plant in Ohio where the company used some of the proceeds from the tax cuts to give employees bonuses.

“Your paychecks are going way up,” he told workers. “Your taxes are going way down. And right now, for the first time in a long time — and you’ve seen it — factories are coming back. Everything is coming back. They all want to be where the action is.”

At least some of the action, for the moment, will be on the trading floor.

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