Sep 27, 2019

Trump is hurting the market

Felix Salmon, author of Edge

Illustration: Sarah Grillo/Axios

The "tweet" button on President Trump's iPhone is moving markets and has become increasingly consequential for trillions of dollars of assets around the globe.

Why it matters: The markets don't trust Trump — nor his Treasury secretary, Steven Mnuchin — to be a calming influence in times of stress.

  • Quite the opposite: They now expect Trump to be an unsettling influence even when things are otherwise quiet. And they're worried that even the Fed is falling under Trump's spell.

What they're saying: A new paper from the National Bureau of Economic Research finds that whenever Trump tweets about interest rates, the market prices in a little bit more of a future rate cut.

Market participants believe that the Fed will succumb to the political pressure from the President.
— Francesco Bianchi, Howard Kung, and Thilo Kind, NBER

JP Morgan's Volfefe index demonstrates that Trump's tweets have also increased volatility in the futures market more broadly.

My thought bubble: The markets normally look to the U.S. Treasury secretary for reassurance during difficult times, but as WaPo's Tory Newmyer says, Mnuchin is "Trump's most loyal surrogate." When Mnuchin weighs in on issues like Trump's conversations with Ukrainian president Volodymyr Zelensky, that damages his credibility more broadly.

  • Trump's fiscal policy is also adding to market volatility. The Trump tax cuts have caused trillion-dollar deficits, which means the government has a huge and constant thirst for free cash. That in turn exacerbates liquidity shortages like the one we saw last week.

The bottom line: The stock market has done a pretty good job of shrugging off Trump's tweets, most of the time. But money markets — the places where businesses keep most of their cash — are much more important for a smooth-functioning economy than the stock market is. And they're showing increasing signs of concern.

Go deeper

Updated 37 mins ago - Health

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

India extended its nationwide lockdown — one of the longest-running in the world — on Saturday, as deaths and infections rise, per Johns Hopkins. The country also moved to allow restaurants, hotels and churches outside of hotspots to begin reopening.

By the numbers: Nearly 6 million people have tested positive for COVID-19 worldwide and over 2.5 million have recovered from the virus. Over 367,000 people have died globally. The U.S. has reported the most cases in the world with over 1.7 million.

Updated 2 hours ago - Politics & Policy

In photos: Protesters clash with police nationwide over George Floyd

Police officers grapple with protesters in Atlanta. Photo: Elijah Nouvelage/Getty Images

Police used tear gas, rubber bullets and pepper spray as the protests sparked by the killing of George Floyd spread nationwide on Friday evening and continued into Saturday.

The big picture: Police responded over the weekend in force, in cities ranging from Salt Lake City to Atlanta to Des Moines, Houston to Detroit, Milwaukee to Washington, D.C., Denver and Louisville. Large crowds gathered in Minneapolis on Saturday for the fourth day in a row.

Updated 2 hours ago - Science

Live updates: SpaceX launches NASA astronauts to space station

Photo: NASA TV

SpaceX just launched NASA astronauts Doug Hurley and Bob Behnken on an historic ride to the International Space Station.

Why it matters: The launch brings crewed launches back to the U.S. for the first time in nine years, since the end of the space shuttle program.

Follow along below for live updates...