When I woke up to a Dow Jones Index up 385 Points and a Nasdaq up over 100 points, I knew something big had happened. And lately when this has happened (in fact, big moves for stocks, either way), it had the usual suspect’s fingerprints all over them. And that man, of course, is Donald J. Trump!
When the Fed boss played ball and put off 2019’s expected three interest rate rises, he’s been twitter trolled by DJT. When China trade deal talk drove stocks up in early and then late January, there was usually a Trump tweet in the media mix. And of course, the US Government shutdown, trade deal-driven negativity, tax cuts, tariffs and so many big market moments had Donald or one of his trusted lieutenants in the driving seat!
And it got me thinking, when has a leading politician here ever had so much impact on the market? Paul Keating was the master and boy did he do a lot. And like Trump, he both drove stocks up and down with the floating of the dollar, deregulating banks, cutting tariff protection, changing the tax system and much, much more.
Until the 1987 crash, stocks were on a tear higher and they even resumed the climb until the 1990-91 recession. And Peter Costello had a huge spike as Treasurer, as the chart below shows and even Wayne Swan, after the GFC gave stock buyers reasons to go long stocks.
The chart below shows from September 13 (when Tony Abbott became PM) to now, and what the All Ords has done under the Coalition. And it doesn’t make great reading.
Since the the Coalition has been running the show, the capital gain for the stock market was just short of 20%! Over in the States, the gain was more like 65%!
Now I know there have been reasons for our underperformance, such as the end of the mining boom, a China slowdown and drought but we have kicked some own goals, with the Murray Inquiry into the Financial System, the Royal Commission into the Financial System, dumping Prime Ministers and so on.
Now I’m not saying the inquiries weren’t valuable but the question is: could better leadership and guts shown by our politicians have led to a better stock market?
Afterall, the economy has done well and jobs have been created and while it seems strange for me to ask this objective question, I have to ask: Do we need our political leaders to be more hands on and impactful on the stock market?
Right now, the media is going mad scaring us about price falls, which are all speculative and they’re being driven by economists and property speculators, who are changing their guesses nearly every month, proving that their first, second and third gueses weren’t accurate in the first place!
The latest one tells us that Sydney and Melbourne price falls will be around 20% but others are going higher, and bank lending to investors is seen as the problem. However, have we seen any of our national politicians going public and saying if bank lending is stopping genuine borrowers from accessing money, then we’ll change that?
Trump would be tweeting his intentions to fix a problem but our guys go missing in action. They’re like cigar store Indians (can I say that nowadays?), who just stand by and insult Labor politicians, which we voters don’t care about.
Keating, Costello and Trump took risks and the results showed on the stock market scoreboard. When clobbered by the GFC, Even Wayne Swan went out there and spent money and the stock market surged. And while it isn’t always the right policy to pursue, back then it was gutsy and right.
Once we got growing, Swan should’ve shown guts and cut spending but, like the Coalition, he did have to endure the revolving door PM problem, which made responsible and strong leadership hard to pull off.
The irony is that Bill Shorten, with his policies of changing negative gearing, cutting the capital gains tax discount and banning retiree tax refund from franking credits, will have a stock market impact but unfortunately, these policies will probably push stock prices down!
Scott Morrison and Josh Frydenberg have only got to May 18 to do something for the stock market and to ensure the price falls of housing aren’t as mad, bad and dangerous as some experts are predicting/guessing.
As the old saying goes Scott and Josh, “No guts, no glory!”