Publicly, President Trump is predicting that Republicans will maintain unified control of the federal government after next week's congressional elections, but he also tweeted Tuesday that the stock markets, now back to where they started 2018, are "taking a little pause" because "people want to see what happens with the midterms." This is part of Trump's new "simple strategy if markets and the economy cool over the next two years: Blame Democrats and the Fed," Politico reports. "In recent days, Trump and his senior advisers have repeatedly argued that recent turbulence in the stock market reflects investor fear that Democrats will retake the House in the midterm elections next week."
According to economists and market analysts, "these arguments bear little connection to reality," Politico says, explaining:
Instead, they note that the economy is following a pattern many predicted when Trump and Congress slashed corporate tax rates last year: A period of faster growth followed by a return to the pace of around 2 to 3 percent that has persisted for nearly a decade with annual deficits rising. Market analysts and traders also attribute much of the recent volatility in stock prices to fear over Trump's bitter trade war with China and concern that corporate profits have hit their high point for the current economic expansion, which is now in its 10th year and approaching the longest expansion on record. Panic over Democratic gains in Congress does not rank high on the list of worries. [Politico]
Stocks dropped sharply on Monday, for example, directly after a report that Trump could slap tariffs on just about all imports from China as soon as December. And underscoring the rising deficit, the Treasury Department said Tuesday that federal borrowing will rise to $1.34 trillion this year, more than double 2017's borrowing and the highest level since post-recession 2010. You can read more about what's really moving the markets at Politico. Peter Weber