Posts tagged with "stock market"

Will Society Grow Angry Enough to Oust Trump? Watch the Stock Market

By Alan Hall

The political left is busy gathering rationales for impeaching President Trump. The political right is busy crying foul. Both sides may be missing an important indicator of his fate: the stock market.

The U.S. House of Representatives has voted to impeach a president twice in history. In both cases, the stock market was rising, and in both cases, the Senate voted for acquittal.

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Figure 1

Figure 1 shows the timing of President Andrew Johnson’s impeachment. On March 2, 1868, the House of Representatives formally submitted eleven articles of impeachment against Johnson. Yet the Senate acquitted Johnson on May 26, 1868, during a stock market rally that added to the 250% increase since October 1857.

 

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Figure 2

Figure 2 shows that a substantial rally in the Dow preceded President Bill Clinton’s impeachment in the House and subsequent acquittal in the Senate. Some of the most dramatic events in the Monica Lewinsky scandal occurred during the largest slide in the Dow during Clinton’s presidency. And despite a $70-million prosecution of perjury and obstruction of justice charges, the Senate ultimately acquitted the president as the Dow, Dow/gold and Dow/PPI rose to important peaks.

 

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Figure 3

Figure 3 shows the Dow Jones Industrial Average surrounding President Richard Nixon’s near-impeachment and resignation from office. The Watergate break-in occurred toward the end of a strong 67% rally in the Dow from May 1970-January 1973. That rally preceded Nixon’s landslide re-election. But as the Dow fell, the Watergate investigation ramped up, and Nixon’s fortunes changed. With almost certain impeachment looming, Nixon resigned from office on August 9, 1974.

Why are stocks and presidents’ fates tied so closely together? Socionomic theory posits that society’s mood influences both stock prices and the public’s perceptions of its leaders. Positive social mood makes society feel optimistic, buy stocks and credit leaders for their good feelings. Negative social mood makes society feel pessimistic, sell stocks and blame leaders for their bad feelings.

These tendencies show up in the results of U.S. impeachments and near-impeachments, and they’re also evident in presidential re-election outcomes. My colleagues at the Socionomics Institute demonstrated in a 2012 paper that stock market declines have tended to precede defeats of incumbent U.S. presidents, while stock market advances have tended to precede re-elections of incumbents. In fact, they found that the stock market proved to be a better re-election indicator than inflation, unemployment and GDP growth combined.

 

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Figure 4

So, what does this mean for President Trump? We considered this question in the June 2017 issue of The Socionomist. Figure 4 is a chart from that issue, updated to the present. It depicts the trend of social mood as reflected by the Dow. We left the gray arrows showing our 2017 analysis, and we added red arrows to suggest the possibilities going forward. In July 2017, Congressman Brad Sherman formally introduced an article of impeachment against Trump in the House of Representatives. Yet the impeachment process fizzled as the stock market advanced during 2017. Following the stock market peak on January 26, 2018, however, the tone of the critiques shifted, and even some on the political right became more disapproving of the president.

Since the October 3 stock market peak, criticism of the president has grown more raucous, and the Mueller investigation has implicated more of the president’s inner circle in illegal activities. The Democrats won control of the House in the 2018 midterms. On November 23, A New York judge allowed a lawsuit against the Trump Foundation to move ahead. A November 26 Gallup poll revealed Trump’s disapproval rating had hit an all-time high. By December 17, the Mueller investigation had issued more than 100 criminal counts and charged 34 people, 10 of whom have been found guilty. That same day, Wired published its list of “All 17 (Known) Trump and Russia Investigations” and said, “it’s increasingly clear that, as 2018 winds down, Donald Trump faces a legal assault unlike anything previously seen by any president.”

On December 18, the Trump Foundation agreed to dissolve, accused by the New York attorney general “of engaging in ‘a shocking pattern of illegality’ that included unlawfully coordinating with Mr. Trump’s 2016 presidential campaign.” On December 20, Secretary of Defense James Mattis resigned, followed closely by diplomat Brett McGurk. Pentagon chief of staff Kevin Sweeney has also resigned. Christmas week, the National Christmas Tree stayed dark due to the government shutdown. Several news organizations ran stories Christmas Eve with versions of The Atlantic’s headline, “President Trump’s Nightmare Before Christmas,” as the stock market plunged. Of course, staunch supporters of the president remain, though it’s worth noting that Nixon had an approval rating among Republicans of approximately 50 percent when he resigned. Yet the number of critics of Trump is rising. According to a December 19 NBC News/Wall Street Journal poll, 41% of Americans favor impeachment hearings.

What the Mueller investigation will ultimately reveal remains a big question. But social mood may play a bigger role in Trump’s fate than the facts. For that, watch the stock market closely, our best reflection of the trend of social mood.

Stock Market could predict Trump’s impeachment?

Those who want President Trump to stay in office should hope the stock market rises, and those who want him ousted should hope it crashes.

Why? History shows that the stock market is a useful indicator of people’s attitudes toward the president. Socionomic theory proposes that society’s overall mood regulates both stock prices and the public’s perceptions of its leaders. Positive social mood makes society feel optimistic, bid up stock prices and credit leaders for their good feelings. Negative social mood makes society feel pessimistic, sell stocks and blame leaders for their bad feelings.

These tendencies are evident in presidential re-election outcomes. Presidents Hoover and Carter, for example, lost bids for re-election during trends toward negative social mood as reflected by declining stock prices. In fact, the stock market is a better re-election indicator than inflation, unemployment and GDP growth combined, as my colleagues at the Socionomics Institute demonstrated in a 2012 paper.

Social mood’s influence is also evident in the results of U.S. presidential impeachments and near-impeachments. Twice in history, the U.S. House of Representatives has voted to impeach a president. In both cases, social mood was trending positively, as reflected by rising stock prices, and in both cases, the Senate voted for acquittal.

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Figure 1

Figure 1 illustrates the timing of the first presidential impeachment. On March 2, 1868, the House of Representatives formally agreed to eleven articles of impeachment against President Andrew Johnson. The Senate took three separate votes, and each fell one vote short of the two-thirds majority necessary to remove Johnson from office. The Senate acquitted Johnson on May 26, 1868, during a stock rally that added to the 250% increase since October 1857.

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Figure 2

Figure 2 shows that a substantial trend toward positive social mood preceded President Bill Clinton’s impeachment in the House and subsequent acquittal in the Senate. Note that some of the most serious events in the Monica Lewinsky scandal coincided with the largest downturn in the Dow during Clinton’s presidency. Yet, as the Dow recovered, so did Clinton’s approval ratings. And despite a $70-million prosecution of Clinton’s related perjury and obstruction of justice charges, the Senate acquitted the president as positive social mood lifted the Dow, Dow/gold and Dow/PPI to important peaks.

 

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Figure 3

President Richard Nixon’s near-impeachment and resignation from office serves as a textbook case of how social mood influences the fortunes of public figures. Figure 3 shows the Dow Jones Industrial Average surrounding his time in office. The soon-to-be-infamous Watergate break-in occurred toward the end of a strong 67% rally in the Dow from May 1970-January 1973. That trend toward positive mood helped Nixon win re-election in a landslide. But as mood trended toward the negative, the public’s view of its leader darkened, its appetite for scandal increased, the investigation accelerated, and Nixon’s fortunes changed. With almost certain impeachment looming, Nixon became the first president to resign from office on August 9, 1974.

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Figure 4

What does this history tell us about the probability that President Trump will serve a full term in office? We considered this question in the June 2017 issue of The Socionomist. Figure 4 is a chart from that issue, updated to the present. It depicts the trend of social mood as reflected by the Dow. We left the gray arrows showing our 2017 analysis in place, and we added red arrows to indicate the possibilities going forward. In July 2017, Congressman Brad Sherman formally introduced an article of impeachment against the president in the House of Representatives. Yet as the market rose during 2017, President Trump—despite low approval ratings, tremendous staff turnover, unrelenting criticism from the political left and numerous indictments and charges of Trump associates in the ongoing Mueller investigation—did not face an impeachment vote. After the stock market peaked on January 26, 2018, however, the tone changed, and even some on the political right became more critical of the president.

Since the October 3 stock market peak, disapproval of the president has grown steadily louder and more strident. At the same time, the Mueller investigation has implicated more and more of the president’s inner circle in illegal activities. The Democrats won control of the House in the 2018 midterms. A November 26 Gallup poll revealed Trump’s disapproval rating had hit an all-time high. On December 10, Fox News’s senior judicial analyst Andrew Napolitano said Trump could be charged with “three separate crimes and could be indicted while serving as president.” By December 17, the Mueller investigation had issued more than 100 criminal counts and charged 34 people, 10 of whom have been found guilty. That same day, Wired published its list of “All 17 (Known) Trump and Russia Investigations” and said, “it’s increasingly clear that, as 2018 winds down, Donald Trump faces a legal assault unlike anything previously seen by any president.”

In the weeks since the Trump Foundation agreed to dissolve, and Secretary of Defense James Mattis and diplomat Brett McGurk have resigned. On December 24, Time reported, “National Christmas Tree to Stay Dark During Holiday Due to Government Shutdown,” and several news organizations ran stories with versions of The Atlantic’s headline, “President Trump’s Nightmare Before Christmas,” as the stock market plunged. Of course, stalwart supporters of the president remain. Yet the number of oppositional voices is rising. A December 19 NBC News/Wall Street Journal poll found that 41% of Americans favor impeachment hearings.

We don’t know what the Mueller investigation will ultimately reveal, but for Trump, the facts may not matter as much as the social mood. Fasten your seatbelt and keep your eyes on stock market indexes, our best reflection of the trend of social mood.

Doron Levin weighing in on President Trump’s comments

SiriusXM host Doron Levin weighing in on President Trump’s comments – during his State of the Union address – on Detroit and the auto industry.

AUDIO: https://soundcloud.com/siriusxm-news-issues/doron-talks-sotu

“…State of the Union message from President Donald Trump and he did take the time to make a shout out to Detroit and to the auto industry.

I think we should talk about it because he did say in his speech that because of him the country was building and expanding auto plants, something that we haven’t seen in decades. That was one of his assertions.

He also said that very soon auto plants were going to be opening all over because of him.

With the President you always have to fact-check what he said. Afterwards he said that this was the biggest audience that had ever heard a State of the Union address and, of course, that wasn’t true but, we have to fact-check this stuff about the auto industry too. It turns out that while he does want to take credit for this there’s some good and there’s some bad.

The good is that it is true that we have had a big boom in the stock market and in personal wealth since he came into office. I don’t how much that can hang on him but it’s going to be that we can buy more cars, probably.

And that people are feeling optimistic and that’s going to be very good for the car makers. And I love it when the car makers are doing well because it means they can invest more in new models and we can get more features. And the whole mobility scene gets better because people are feeling confident and buying new vehicles so, that’s very good news.

As far as the assertion, that we’re now going to have a bunch of new car plants because of him let’s look at that.

In the last 20 years, and this is mostly when he’s not been President, global car makers have actually invested 75 billion dollars in the United States. What we need to understand is that the United States is a very good place to not only to build vehicles but also to export vehicles that’s because this is a very profitable market, it’s because we have very favorable trade agreements and I hope that doesn’t get messed up with the North American Free Trade Agreement being renegotiated in a way that isn’t advantageous to us. President Trump has said that he’s going to re-negotiate that and that has to be done carefully because that has worked out for us.

We have a new Volvo plant coming soon to South Carolina; a new Mercedes Benz plant in Alabama; we have additions coming to the BMW plant in South Carolina; Toyota and Mazda are going to build a new plant in Alabama; and even Chrysler is going to bring back some of its truck production from Mexico to Michigan, which is good news for the UAW and good news for the Michigan economy.

So, yes, the place is great for building vehicles and I think the Presdient was right to highlight that stuff but, we can’t say that it’s basically because of him. It’s been happening, actually a trend, a long-term trend, long before he even announced he was going to run for President so, let’s put that in some kind of perspective.

The important thing about this truck deal that Chrysler has now in Michigan is that it’s really being done as a hedge against the possibility that trade agreements that made it advantageous to build trucks in Mexico and bring them back to the United States may change. And if that changes then Chrysler needs to be building those trucks in the United States and it’s important for the administration not to mess up trade rules.

Now, I know a lot of you tune in to this show to hear about cars but, part of hearing about cars is also hearing about how they’re built, where they’re built, why they’re exported to where they are, and why they’re imported to where they are and a lot of that has to do with the trade rules. So, we look forward to all of that being negotiated in a way that’s advantegous to us in the United States and I think that that’s going to happen.

I don’t foresee that the North American Free Trade Agreement or some of the other agreements that allow cars and trucks to be built in Canada, United States, and Mexico and parts built in those places that allow them to go across the borders more or less without tariff I don’t foresee that changing. One thing that might happen, that the administration may do, and this is why no one really wants to contradict the President on this and get him upset, is a rethinking of some of the stricter fuel-efficiency rules and that could mean that we could see, soon, a relaxation which the auto makers would like, because they don’t want to bring in electric vehicles more quickly than people actually want to drive them.”

SiriusXM’s “In The Driver’s Seat with Doron Levin” airs every Saturday at 12:00pm ET on SiriusXM Insight channel 121.

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