Markets were rocked by sharp losses at the start of the week on Monday, when the S&P 500 fell 3 percent and the Dow Jones Industrial Average fell 2.6 percent (more than 1,000 points). The market crash came as recession fears mounted, fueled in part by last week’s cooler-than-expected jobs report and concerns that the Federal Reserve has kept interest rates too high for too long.
Trump, the Republican presidential nominee for November, was quick to portray Monday’s market plunge as the first act in a broader “economic catastrophe” that he blamed on de facto Democratic nominee Harris, calling the selloff “the Kamala meltdown.”
“This moment could lead to real economic disaster around the world,” his running mate, Ohio Sen. J.D. Vance, wrote in a post on X. “It requires steady leadership — the kind President Trump has provided for four years.”
But as Wall Street rebounded after that, starting Tuesday, the “Republican attack line” quickly stopped, according to a report by the American network “CNBC” that was viewed by the “Sky News Arabia Economy” website.
Trump has posted at least nine separate posts on Truth Social, blaming the stock market crash on the policies of the administration under President Joe Biden and Harris. On Tuesday, as stock markets rebounded, Trump remained silent on social media about the markets..
According to the report, Trump’s tactical shift is a result of his tendency to tie his political campaign messages to naturally volatile markets. When markets rise, Trump usually tries to take credit, and when markets fall, he usually blames his opponents.
In January, when the Dow and S&P hit then-record highs, Trump said it was because investors were betting he could beat Biden, who has since dropped out of the race and endorsed Harris.
“This is the Trump stock market,” Trump wrote in a post on his platform. “Because the polls against Biden are so good that investors are predicting I will win, which should send the market higher.”
President’s influence
Dr. Nidal Al-Shaar, Chief Economist at ACY Financial in Australia, speaks in exclusive statements to the “Sky News Arabia Economy” website, beginning with the extent of the direct impact of the “person of the president” on the performance of the financial markets, saying:
- The US Constitution clearly defines the limits of the US President’s influence on economic aspects, as the President does not have direct influence on all areas of the economy, as his role is limited to financial policies that include spending, taxes, health care, defense, government investments, and public debt issues, in cooperation with Congress.
- In contrast, monetary policy is managed by the Federal Reserve, which enjoys almost absolute independence.
- The president may have limited influence on monetary policy, especially during the nomination and election period, but this influence is often temporary and variable, as we saw during the Trump rise and Harris’ candidacy.
Regarding the recent market turmoil – which Trump tried to exploit to promote himself and attack his competitor in the November elections, Kamala Harris – Dr. Al-Shaar points out that these turmoils were the result of a new economic situation that political and monetary management should have expected.
This situation is characterized by slowing economic activity, declining industrial production, increasing geopolitical tensions, and rising inflation rates, according to Al-Shaar, who stresses that addressing inflation during 2022 and 2023 by raising interest rates was the responsibility of the Federal Reserve, without noticing tangible effects of fiscal policy on the general economic situation, as political management had no tangible impact.
Regarding the Trump effect, he adds: When the stock market rose to an unprecedented high before the current decline, Trump attributed it to voters’ expectations of his election victory, claiming that this improvement in the markets was the result of optimism about him. But when the stock market fell, the president accused current policies of failing to achieve the desired goals.
Al-Shaar expressed his belief that the former president’s statements reflect Trump’s personality as a shrewd businessman who has the skill to interpret things in a way that suits his interests, noting that this policy may be misleading to public opinion and voters. He added that despite the relative errors that the Federal Reserve may have made in assessing the factors affecting the current economic situation, directing full criticism at the current administration is unjustified.
Trump’s precedent
“I think politicians throughout history have avoided trying to link their wealth to the stock market as a signal of their policies or anything because the market goes up and down everywhere,” Moody’s chief economist Mark Zandi was quoted as saying by CNBC. “President Trump was the first to do that, and I’m at a loss.”
Zandi believes that Trump’s use of the stock market as a talking point in his campaign, in addition to being politically risky, also reflects a misconception about how to measure the health of the economy and what voters think.
“For most Americans, what matters at this point in time, of course, is inflation, prices, grocery prices, rents… The vast majority of Americans, when they think about their financial situation, stocks are at the bottom of the list, at their lowest.”
Voters have consistently ranked the rising cost of living as a top priority in polls this election cycle.
Trump has exploited this economic pessimism, criticizing White House policies even as the U.S. economy has been in a steady, if slow, recovery from the pandemic, outpacing other developed countries, the report said.
A crucial role for the economy
In this regard, the Head of Global Markets at Cedra Markets explained that:
- The US economy plays a crucial role in determining the course of elections and politics in the United States.
- Former President Trump exploited any weakness in the US economy, including the performance of the Wall Street stock market, to launch attacks on his political opponents.
- In contrast, the Biden administration has made notable achievements, including in terms of job creation (..).
He added: The Biden administration has not been without challenges, most notably high inflation rates and declining purchasing power of citizens. Although Biden boasts about rising wages, these achievements may be threatened by rising inflation.
Under these circumstances, observers expect a fierce electoral battle, in which candidates will use all available tools, including the economy and the performance of US stocks, to influence voters.
“Trump, for example, put a lot of pressure on the Federal Reserve to cut interest rates before the election, which highlights the importance of monetary policy in shaping public opinion,” he added, stressing that the coming period is expected to witness more economic fluctuations, as each party seeks to exploit them to its advantage. There is no doubt that these fluctuations will affect the results of the upcoming presidential elections.
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