Dow down to Trump

America’s The Dow Jones industrial index suffered its biggest drop in three months on August 17^th, 2017.

The average fell 274.14 points, or 1.2 percent to close at 21,750.73.

Background

The Dow Jones is a stock market index. It, along with other stock market indexes, goes through periods of general increase or general decline. A period when there is an increase is referred to as the bull market and when there is decline, it is called a bear market.

Since 2009, Dow has been experiencing a bull market. The market began rising even further since the US presidential elections. On January 25, 2017, the Dow closed above 20,000 for the first time ever. In August 2017, for the first time in its 121-year history, it broke the 22,000 barrier. It was partly buoyed by Apple’s robust third quarter results.

US President Donald Trump has often bragged about the robust performance of the stock market since he assumed office. However, this is breaking with precedent. Stock markets follow a cyclical 10-year pattern. According to experts, nearly every American president in the past 70 years has eventually encountered a stock market storm.

Analysis

The drop in the Dow index has been has been attributed to the increasing instability within the Trump administration. A number of white supremacist groups had participated in a rally called Unite the Right in Charlottesville on August 12th and 13th 2017. US President Donald Trump has drawn criticism for seemingly equating white supremacist groups to the anti-fascist protestors. Two important advisories comprised of business leaders and CEOs was also disbanded after they began leaving the councils in protest.

Additionally, media reports have suggested that Gary Cohn, the chief economic advisor to President Donald Trump and Director of the National Economic Council, was especially unhappy with the President’s remarks. Cohn is a prominent member of the Jewish community and insiders fear that if he were to resign, then the markets would crash.

Chris Rupkey, chief financial economist at MUFG said, "The reason for the selloff seems to be the cumulative news over the last two days where it looks like the president is being deserted by the cream of the cream of the business establishment. The rumor of Gary Cohn leaving the administration (Thursday) shows you how worried the market is about the Trump presidency imploding."

Assessment

Our assessment is that the market, which had up until now betted heavily on Trump’s economic agenda, is now starting to doubt whether the President will be able to deliver on his promised results. This will prove to be detrimental for Trump who has often boasted about the positive influence his Presidency has had on the market.