Dow’s 20,000 Trump Rally the Rally to Watch?

Media outlets have been publishing articles trying to make sense of the Dow’s recent historical moment of pushing beyond the 20,000 level. They are riddled with political analyses, and while they are quite trite, they have been thought provoking, for the political scientist in me anyway.

Media outlets skeptical of the Dow as a reflection of President Trump’s high degree of pro-growth policies attribute the push to the mainstream media’s “usual mixture of hype and (political) mythology,” and conclude, (probably because of their disdain for President Trump) the push over 20,000 is overblown. They are fair observations, and I agree in a sense, but in my opinion, these opinions are misguided.

If there is anything I’ve casually observed over the last few years it’s the health of the financial sector is not completely linear of overall health for the individuals living within the economy. As capital consolidates, as technology continues to replace labor, and jobs are outsourced, the middle class blue collar workers are being left in the cold.

Under Obama, stock prices did very very well, and no one on Wall Street was really complaining; it hit historic highs under his eight years. Maybe it wouldn’t have happened as quickly, but Dow hitting 20,000 would have happened eventually. And yet, for all that perceived economic growth, Trump single handed-ly demolished the democratic “blue wall.” He turned the Rust Belt. What does that tell me? It tells me that the financial sector’s success doesn’t necessarily translate to the Rust Belt’s success.

Limiting Trump’s pro-growth rhetoric to the stock market is missing the expectations of a Trump presidency. We have to change the way we are looking at the question.

They ought to be asking, to what degree will the gap between the financial sector’s growth and the real economy’s growth close? Will middle class growth catch up with the inevitably increasing stock market?

So are investors over indulging in Trump’s rhetoric? Yes. Reveling in the rhetoric of less regulations, less taxation, and overall pro-market policies were bound to send a shock to Wall Street. And it’s true that controlling the 2 political branches of government doesn’t equate to 100% success. You’ll need super majorities in the House, and the Senate can filibuster for 4 years.

But who cares about that rally? It isn’t the rally to be watching! To the extent the stock market and real economy rallies are or are not overblown will depend on how Trump works with and/or constitutionally circumvents Congress over the next 4 years.