2020-07-17 14:35:15 UTC
I've been following the market pretty closely over the past 6 months and
have been puzzled by its behavior. What explains the optimism in the
recovery since mid March, especially in the face of continued warnings
about an imminent crisis driven by a surge of bankruptcies, layoffs,
expenditures of reserves, and even a new peak in mortgage defaults?
I think that I may have found an answer in today's NYT DealBook.
Normally an optimistic publication, today's issue turned dark with a
report by Maggie Haberman, White House correspondent to assess how the
Trump administration was managing its pandemic response, reelection
campaign and more.
Basically, she reports that Republicans and the White House increasingly
view the stock market as an alternative to declining popularity in
political polling. Increasingly, this worries politicians and business
leaders who do not want their names to be associated with Trump,
especially in the context of government response to the virus and racial
unrest. They are asking, "What if the market rally fizzles before the
Her reporting concludes, "What could improve Mr. Trump’s odds of
re-election between now and Nov. 3?" Barring unforeseen events, what
Maggie hears from Republicans is pretty simple: “If only Donald Trump
would stop tweeting. If only Donald Trump would stop talking about
This gives me a strong sense of deja-vu. Recall the Republican
"autopsy" following their losses in 2012? It was all about what they
needed to change in their messaging. Are Republicans making the same
mistake now? Is the weakening of the Republican Party a result of poor
messaging and not a commentary on the failure of their policies? It is
easy to blame Trump's undisciplined Tweets, but perhaps the erratic
behavior of the market is what is only a product of messaging as
investors search for any news that might be optimistic. What else could
explain the increases in volume at any hint of news coming out of the
administration? Where is the rationality of careful market analysis
based on actual performance?
If I am correct on this, we are in for an even bumpier ride in the
months ahead as the Republicans search for the right message and fail to
consider that their problems are much more fundamental.
Personally, other than attempting a little bottom fishing back in
mid-March, I'm staying out of the market, even avoiding the supposedly
safe bond market. As long as FDIC remains a safe harbor, at least my
principal is protected.