A Donald Trump Presidency may be very bad for the markets. This was evidenced by the sharp drop in both the DOW and the NASDAQ all last week.
The drop began after the revelation was made that FBI Director James Comey had opened a new investigation into the whole Hillary Clinton e mail scandal. That led to a huge shift in the polls. Not only did Trump surge, but certain states which were already thought to have flipped to the Democrats this year were shown to have gone back to the Republican Party.
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This one bit of news slammed Hillary Clinton in the public eye and rejuvenated the Trump campaign which had previously been characterized as moribund. One day they were like Cubs fans after game five and the next they were like the same people once the Cubs had come back to force a game seven when, it was tied going into extra innings. Their man had suddenly come back and could actually win.
But Wall Street was not celebrating along with them. The S&P 500 had dropped for nine straight days for its worst performance since 1980. It lost 9% of its value during that time, CNBC reports. It came back slightly on Friday as Trump’s surge seemed to level out with Clinton still predicted to win it all, albeit by a much smaller margin.
The Dow Jones also dropped every day since the Comey revelation was made.
Then on Sunday FBI Director James Comey announced that he found no new evidence against Hillary Clinton and would not be changing his previous assessment that she had not broken any laws. The markets celebrated.
Today the S&P is up more than 1.8% as of this writing and is nearing its high from before the drop. And as of now the DOW is up 1.53%.
Wait isn’t this backwards? Don’t the markets prefer Republican Presidents? After all, they cut taxes on businesses and support deregulation and ensure lower interest rates which makes it cheaper for companies to raise money and makes stocks a more attractive investment than bonds.
So why is Wall Street happier to see a Hillary Clinton Presidency than a Donald Trump one?
Well it might have something to do with Donald Trump’s boast that he would have no problem defaulting on America’s debt. If this were to happen the Dollar would crash and American bonds would become worthless. The Dollar would immediately cease to be the world reserve currency and their would be a worldwide economic catastrophe which would make the Great Depression seem like the Roaring Twenties in comparison.
Then there is that pesky wall Trump wants to build. If he succeeds in deporting only half of the 11 million people who he has promised to send south of the border, it would greatly hurt American labor resources. Specifically, the cost of agricultural goods and construction in much of the U.S. will go up along with many services. This will be a drain on the economy.
Oh, and his talk of threatening America’s trading partners with sanctions and new tariffs on their goods, and of abrogating treaties like NAFTA, if enacted on would start a trade war. America would be left out in the cold as the instigator while other nations continue to do business with each other as before.
So the business interests on Wall Street may prefer a traditional Republican to a Democrat, or maybe they do not care any more since both parties support continuing the corporate welfare system as operated by the Federal Reserve, but they certainly understand the danger to the U.S.economy posed by someone like Donald Trump.
Sometimes the conservative demagogue is bad for business and the liberal won makes the lesser of two evils.
