Politics

Trump Busts Stock Market Doomsayers

Dow Jones inches near to 20,000 as economic outlooks soar for the new administration

Donald Trump’s victory in this year’s presidential election was not even official when Nobel-winning economist and New York Times columnist Paul Krugman took to his blog to predict massive stock losses.

The futures market was tanking that evening in the wake of the unexpected result.

“If the question is when markets will recover, a first-pass answer is never.”

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?” Krugman wrote. “If the question is when markets will recover, a first-pass answer is never.”

Krugman’s take was especially gloomy, but he was hardly alone. A steady stream of financial experts had been predicting for months — warning, in some cases — that stocks would fall if Trump won.

Dartmouth University economics professor Eric Zitzewitz predicted that a Trump victory would trigger a selloff of eight to 10 percent.

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Ethan Harris, head of global economics at Bank of America Merrill Lynch, told CNBC on Nov. 3 that stocks would fall if the New York billionaire won.

“From the action in the stock market, the equity market is worried about a Trump victory, about the uncertainty of policy under Trump,” he said.

Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, questioned whether the global economy was resilient enough to withstand a Trump victory.

“The answer, unfortunately, is that growth and employment around the world look fragile,” he wrote Oct. 29 on a website called Project Syndicate. “A big adverse surprise — like the election of Donald Trump in the U.S. — would likely cause the stock market to crash and plunge the world into recession.”

The Thursday before the election, CitiGroup forecast that a Trump win would result in a 3-5 percent decline in the Standard & Poor’s 500. Tobias Levkovich, Citi’s chief U.S. equity analyst, wrote that the markets would be stable if Democrat Hillary Clinton won.

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“However, if Donald Trump were to win, that outcome would have been unexpected and thereby may cause a jump in the equity risk premium,” he wrote in a note to investors.

As far back as June — before Republicans formally nominated Trump — some experts saw stock calamity when they peered into their crystal balls.

“His loose-cannon reputation could be negative for stocks, at least initially, because equity investors hate uncertainty,” Gary Shilling, president of A. Gary Shilling & Co., told Forbes on June 15.

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Fellow billionaire Mark Cuban, a vocal Trump critic, told Fox News in September that he intended to make a “huge hedge” bet on a stock fall if it looked like Trump would win because, “in the event Donald wins, I have no doubt in my mind the market tanks.”

So how much of a hit have stocks taken in the month since Trump won — 3 percent? 10 percent?

Nope.

The Dow Jones industrial average closed at 19.614.81 on Thursday, a 6.99 percent increase from its 18,332.74 close on Election Day. Over the same period of time, the S&P 500 rose 4.98 percent, to 2,246.19.

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