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US Stock market slide muddles Trump’s economic message days before 2020 election

16:43  28 october  2020
16:43  28 october  2020 Source:   washingtonpost.com

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A sudden drop in the stock market threatens to muddle President Trump’s campaign message about America’s economic recovery just days before the Nov. 3 election.

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Trump has touted a partial economic rebound and rising stock market as central to his 2020 reelection bid, frequently pointing to Americans’ 401(K) accounts and investment portfolios. The president has insisted that both the market and the economy would nosedive should he lose to Joe Biden, at one point claiming the Democratic presidential nominee would cause a “super depression."

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But a sharp market drop this week -- which follow a sharp rise in coronavirus cases and continued gridlock over a stimulus deal in Washington -- may complicate the president’s boasts of overseeing a rapid economic recovery. Trump will likely see a boost from positive report on America’s economic growth on Thursday, but investors fear a prolonged downturn in the stock market given that the virus is raging with increasing ferocity across much of the country.

The Dow Jones Industrial Average fell by more than 600 points on Monday, an approximately 2.3 percent drop, one of the largest single-day declines on the year. After a smaller dip on Tuesday, the Dow Jones Industrial Average opened down more than 700 points on Wednesday.

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The Dow Jones is down nearly 2400 points since Sept. 2, a roughly 8 percent decline.

“This election is a choice between a Trump super recovery and a Biden — in my opinion, this is going to happen; I hate to say it — depression,” Trump told a crowd in Ohio earlier this week. “You’re going to have a depression. And your 401(k)s. Does anybody have a 401(k)? Throw them away. They’re not going to be worth — It’s a choice between a boom and a lockdown.”

Wednesday: Dow Jones industrial average skidded 569 points at the opening bell

The stock market dip comes amid wider signs of potential economic headwinds at the end of the president’s first-term.

Multiple federal relief measures approved by Congress expired months ago, depriving millions of small businesses and jobless Americans of emergency financial lifelines. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi (D-Calif.) are formally continuing talks, but another stimulus package is not expected to be passed before the election.

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The spread of the pandemic threatens to wreak further havoc on the recovery. The nation faces a coronavirus outbreak more widespread than those in the summer or spring, with hospitalizations increasing in 38 states and deaths beginning to tick up. The rise in covid cases raises the prospect of another wave of lockdowns that can cripple the economy. El Paso, Tex., and Newark, N.J., have both introduced curfews to curb their spike in covid cases.

The federal jobless rate has come down substantially to 7.8 percent. White House officials frequently point out that several key sectors -- including housing; automobiles; and manufacturing -- show signs of rapid growth that could power the U.S. economic recovery. Analysts expect Thursday could show a quarterly jump of more than 25 percent increase in America’s Gross Domestic Product after the economy sharply contracted in the spring.

Joseph LaVorgna, chief economist of the White House National Economic Council, said after Monday’s dip that the stock market decline was unremarkable and that the underlying American economy remains fundamentally strong. Weekly unemployment claims have begun coming down and retail sales are now above their prior peak, LaVorgna said.

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“I don’t think this is anything fundamentally amiss with the economy,” LaVorgna said in an interview. “The economy looks pretty darn healthy -- and that’s what’s going to eventually steady stocks. I’m not worried. I think the markets are very much sending a message of growth and rebound.”

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Still, even some of the president’s allies acknowledge the challenge posed by the market decline, arguing Trump must continue to blame Pelosi for holding up the stimulus.

“It’s a big, big decline,” said Stephen Moore, an outside economic adviser to the White House. “Trump has to keep saying: ‘Pelosi blocked the plan because she wanted the blue state bailout.’”

Wall Street has had mixed assessments of which presidential candidate would be best for growth. JP Morgan analysts said in a report on Monday that an “orderly” Trump victory represents “the most favorable outcome” for the market. The stock market is still up roughly 40 percent since Trump was elected in 2016. Historically, the market typically increases by about 7 percent every year, meaning Trump’s term in office is better than the median president but not spectacularly so.

Moody’s Analytics estimated stronger GDP growth under Biden’s economic plans than Trump’s. Other financial analysts have pointed out that Trump’s term in office has been punctuated by erratic swings in the market, dropping dramatically during the 2018 government showdown and again when trade tensions flared in the summer of 2019. About half of all Americans own no stock at all, including retirement accounts such as 401(k) plans.

“We got a big gain but, boy, were we subjected to extreme volatility to get it, and not everyone got to enjoy the ride up,” said Chris Rupkey, chief financial economist at MUFG Union Bank.

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Ed Yardeni, president and chief investment strategist of Yardeni Research, said on Monday that the early sell-off may well represent “garden variety volatility” rather than a new crisis. Manufacturing indexes last week, Yardeni pointed out, still suggest a “v-shape” recovery and wider strength in the broader U.S. economy. It’s still possible that stocks make a healthy recovery in time for Election Day.

“It’s not a correction yet. This is just more of the same,” Yardeni said. “The market could be up big tomorrow. Or it could be back to worrying about covid.”

Will the Supreme Court ride to Donald Trump's rescue? Don't count on it. .
The 6-3 conservative majority that Trump and Senate Republicans engineered over the past four years likely is in no position to save his presidency. It would take a razor-thin margin or a major legal dispute in a state whose electoral votes could hand the White House to Trump or Democrat Joe Biden. Such a reprise of the Bush v. Gore case in 2000, when the court ruled 5-4 along ideological lines that vote recounts in Florida had to stop after a month-long dispute, is not anticipated. © Mark Hoffman, Milwaukee Journal Sentinel/ USA TODAY Network Workers process ballots Tuesday, Nov.

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