President Donald Trump has figured out something very important about the stock market from his perspective: If he simply says “stimulus,” stocks jump. Even if he doesn’t really mean it. Even if he’s not putting in the work to get a coronavirus stimulus package through the Republican-controlled Senate. Even if his latest “big offer” is one that Democrats have already rejected.
President Trump knows that if he has any hope of winning re-election, the stock market needs to be rallying. His “no more talks” tweet of Tuesday led to a significant sell off. Ever since then, he’s been walking back those comments, claiming his team is back at the table, and waving around promises of a $25 billion bailout for airlines, a $1200 check for each American, a renewal of the small business loan/grant Payroll Protection Program.
And today White House negotiators headed by Treasury Secretary Steve Mnuchin were said to be have headed back to talks with House Speaker Nancy Pelosi with a proposal for a $1.8 trillion coronavirus stimulus package. Those “talks” were a 30-minute phone call.
And of course, Democrats have already passed a $2.2 trillion package and it’s not clear what Trump is offering to make them take a $1.8 trillion proposal.
But maybe the White House proposal isn’t for just $1.8 trillion. On Rush Limbaugh’s radio show the President said he wants an even bigger stimulus than what Democrats have offered so far. “I would like to see a bigger stimulus package, frankly, than either the Democrats or the Republicans are offering.”
A proposal for something bigger than the Democrats have offered stands no chance of passing in the Republican-controlled Senate.
But the odds are that Trump isn’t serious but that he has noticed that every time he says a stimulus deal might be possible, stocks jump.
Today the Standard & Poor’s 500 closed up 0.88% and the Dow Jones Industrial Average finished ahead by 0.57%. The NASDSQ Composite ended the day up 1.39% and the small cap Russell 2000 was higher by 0.52%.
One of the reasons that I don’t think Trump is series in his big stimulus talk is that there are no signs that the White House is working to bring Republicans in the Senate along on his package. Every time Trump tweets, Senate Majority Leader Mitch McConnell reminds us all–and the White House too–that he doesn’t have the votes from Republicans to pass a stimulus of $1.8 trillion–or maybe any stimulus package at all. On Friday afternoon the White House was saying that “maybe” the President would talk to Senate Republican leaders today. “Maybe” isn’t a sign of a serious legislative effort.
My question now is how many more times the stock market will jump higher when the President tweets “stimulus.”