MAM: “It’s the economy stupid”: Trump set for second-term victory

trumpLove him or hate him, Donald Trump has created a buoyant US economy since he became the 45th President of the United States on November 8 2016.

US GDP remains strong. The most recent data shows a 3.1% growth for the first quarter of 2019. This is lower than the 2018 peak of 4.2%, which has been the highest level achieved during President Trump’s administration. This is, however, less than the 5.1% achieved in the second quarter of 2014, when Obama was President.

With positive figures like these, indiscretions like involving his daughter Ivanka, in the recent G20 summit meeting in Osaka, could be forgiven? Even though it was a bit Forrest Gump.

There is also Trump’s historic breakthrough meeting with North Korea’s leader Kim Jong Un in the demilitarised zone – the first sitting US President to do so; and then there is the US stock markets.

For personal investors there is much to cheer about Trump’s first year in office. The stock market has set many new record highs during the year. The Dow Jones Industrial Average index has risen 32%, currently standing just above 26,000 having started below 19,800 the day before Trump took office. That represents a phenomenal return for investors at a time when the return on cash is close to zero.

This increase in the stock market in the first year of office compares very favourably with the performance during the first year of George W Bush, the last Republican President when the market fell about 8% and with Bill Clinton’s first year in office when the market rose 20%. However, it is not quite as good as the 35% seen in Barack Obama’s first year in office back in 2009. *

As for the Nasdaq, this has seen a rise of 22% so far this year, with the S&P rising 18%.

The unemployment rate in May stood at 3.6% – the lowest since the late 1960s.

Ryan Sweet of Moody’s Analytics points to the changing profile of the US working population as a key factor here (coupled with Trump’s policies).

There is now a greater proportion of older workers and better educated workers, both of which tend to have lower unemployment rates.

Trump’s supporters argue that his corporation tax cuts along with his US-focused policies, (perhaps isolationist), and his promises of infrastructure investment have all helped the US economy (ignoring the ‘elephant in the room’ – escalating US-China trade tensions).

As for wages, average hourly earnings growth throughout 2017 was between 2.5% and 2.9% – continuing a generally upward trend which began during President Obama’s administration.

This year, wages continued to rise and reached 3.4% in February before slowing slightly.

They are currently rising faster than the rate of inflation, which was 1.8% in May 2019, which means real incomes are rising.

There is also household income in the US to take into consideration. Real median household income has been growing for the past three years – but the rate of growth has slowed, according to official figures.

Trump certainly has enough evidence to prove to US voters, that there has been economic success under his administration. Something he reminded his supporters when he launched his 2020 re-election campaign at a rally in Florida recently.

A buoyant US economy, in fact could be key to Trump’s second term success.

Wasn’t it in fact, Bill Clinton’s campaign manager, James Carville who coined the phrase: “It’s the economy stupid” as a way of defining the 1992 presidential election?

Democratic hopeful, Bill Clinton was running against President George W Bush, who failed to read his own lips and raised taxes, creating a recession that Clinton capitalised on.

Perhaps it could be speculated, that as long as the US economy remains strong, Trump will remain President, despite countless attempts by his rivals to derail him by all means possible: impeachment, personal and political scandals.

*According to data from the Share Centre

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