Does Trump Deserve Credit for the Stock Market?

As an advocate for economics education, I get upset when I hear bogus economics claims being made in politics and the media. When this happens, consumers are fooled into spending irresponsibly. Voters are fooled into supporting policies detrimental to the economy. This has been on my mind lately as President Trump doesn’t let a day go by without taking credit for how well the U.S. stock market is doing.

In fact, the most recent 2 tweets from his account are quoting Fox and Friends talking about his economic policy:

“President Trump is not getting the credit he deserves for the economy. Tax Cut bonuses to more than 2,000,000 workers. Most explosive Stock Market rally that we’ve seen in modern times. 18,000 to 26,000 from Election, and grounded in profitability and growth. All Trump, not 0…

…big unnecessary regulation cuts made it all possible” (among many other things). “President Trump reversed the policies of President Obama, and reversed our economic decline.” Thank you Stuart Varney.

Sure, the Dow Jones Industrial Average is up about 30% over the past year. However, the DJIA does not represent the entire U.S. economy, just 30 companies. The DJIA also has a history of pretty solid growth for over a century:


Big growth in the stock market is nothing new. The U.S. stock market tends to average compounding annual returns in the area of 7-10%, with occasional years of negative returns and occasional crazy years like 2017. These variations in returns tend to be cyclical, with periods of huge growth followed by recessions or depressions. For this reason, it is quite dangerous for politicians to take credit for stock market returns. If there is a market correction within the next 3 years, President Trump is going to have to admit defeat or find someone else to blame for it. (Which do you think he will do?)

The other thing we need to analyze is whether these wild 2017 returns are isolated to the U.S., or if they are part of worldwide trends. Seeking Alpha has an excellent tool for comparing ETF returns from a variety of major asset classes, regions, industries, etc. Let’s see how the U.S. markets over the first year of the Trump administration have compared with the rest of the world.

Keep in mind that the numbers below are all prices of funds representing baskets of securities. They are partially represented by the profits of the companies or securities in their baskets, but they can more accurately be described as how much the market believes them to be worth. A stock price doesn’t necessarily increase because the company is making more money, it increases because the market believes it will make more money in the future. When we measure the stock market in the way that Trump does in his tweets (i.e. “the Dow is 25,000+”), we’re really measuring what the market thinks the 30 Dow companies are worth.

U.S. Stock Market vs. the World

Screen Shot 2018-01-14 at 6.04.49 PM

Let’s start with the large cap Dow Jones and S&P 500 returns that President Trump keeps bragging about. How do we compare with the large cap indices throughout the world?

As you can see from the chart on the right, returns for large cap U.S. companies are very favorable. However, they don’t stand out from the rest of the world. Emerging market returns are consistently larger.

Screen Shot 2018-01-14 at 6.05.03 PMSmall Cap Returns

The picture does not look as good for companies with small capitalizations (usually considered to be companies with valuations within the range of $300 million to $2 billion). U.S. returns again look solid. However, only the Canadian and Russian small cap indices fall behind the U.S. Many other countries, regions, and classifications have two times U.S. returns.

Screen Shot 2018-01-14 at 6.05.15 PMWhat About Bonds?

Let’s take a break from equities and see how debt investments measure up.

Uh oh.

International government bonds are outperforming U.S. treasuries. International corporate bonds are outperforming U.S. corporate bonds. These are huge gaps too.

Screen Shot 2018-01-14 at 6.05.30 PMShow Me the Money

The chart to the right shows how other major world currencies are being traded against the U.S. dollar. Over the last year, all ten major currencies have been up against the U.S. dollar. The U.S. Dollar Bullish ETF (UUP) is down –9.3%.


Are we beating the rest of the world at anything? I mean, after-all, aren’t a lot of these other countries “shitholes?” (Trumps words, not mine)

It can be difficult to measure markets in many small countries. Some of them don’t have internationally traded companies. The countries Trump referred to as “shitholes” were Haiti, El Salvador, and African nations. One of the better representations of this group of countries might be the MSCI Frontier Markets 100 Index (FM). It’s about 24% Latin America, 19% Africa, and 26% Middle East. It’s top 10 countries are Argentina, Kuwait, Vietnam, Morrocco, Bangladesh, Kenya, Romania, Nigeria, Oman, and Bahrain (definitely no Norway). FM is up 35% for the last year, more than any U.S. index I have looked at. Even the so-called “shitholes” are outperforming the stock market that Trump keeps taking credit for.

Screen Shot 2018-01-14 at 6.04.20 PMBreaking It Down

Just to be clear, let’s go country by country through as much of the world as possible. Here is every country that you can invest in through index ETFs.

The only country that had a negative year was Qatar, a country going through a diplomatic crisis with Saudi Arabia and other neighbors. Trump initially supported the Saudi claims against Qatar, before Secretary of State Rex Tillerson reminded him that Qatar is a U.S. ally stationing 10,000 U.S. troops. Oops.

The charts above show that the world is in a bull market. Asset prices of all kinds in nearly all places are soaring. It’s not just the U.S.

As I said before, the danger of taking credit for good stock market returns is that you have to find a way to blame everyone else when they are bad. But what does it say about you when you are bragging about your country’s stock market, despite it not being as good as 30 other countries’ stock markets?

Getting back to where we started, Trump’s Twitter account, Trump’s 3rd most recent tweet says “#AMERICAN FIRST.” Based on Trump’s favorite benchmark of how the country is doing, the stock market, it appears to be more like “#AMERICA THIRTY-FIRST.”

If Trump wants to take credit for the 31st best stock market in the world for 2017, I say he can have it. Congratulations.


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