Politics and business aren’t as intertwined as we often think
Today’s the one-year anniversary of the Donald Trump Confidence Rally, at least according to the president, who has flogged his impact on markets pretty much nonstop. He even worked it into his speech to South Korea’s Parliament on Wednesday — witty, since Korea’s KOSPI Index SEU, -0.30% is beating the Dow Jones Industrial Average DJIA, -0.43% by 7 percentage points this year, and the Standard & Poor’s 500 SPX, -0.38% by 9.
Harabeoji, hold my beer.
Regardless of how Koreans felt about market ruminations from Grandpa (harabeoji, translated), sandwiched between mixed messages on North Korea’s nukes and plugs for his Bedminster, N.J., golf xanadu, the anniversary raises a question: How much credit does Trump deserve for the 19% run in the S&P (and 25% in the Dow) since his election initially tanked futures markets, followed by a morning rally?
The answer is, not a ton. The market’s run mostly proves a happier reality: That politics and business are more separate than we often assume.
There are two big buckets of reasons to be confident about that conclusion, which I pieced together with help from S&P Dow Jones Indices and CFRA Research.
The first is that the biggest factor driving U.S. markets up is that world markets have gone up even more, taking American stocks along for the ride, for a change.
Indeed, the best-performing indexes in the world this year are in emerging markets, and the horse they are riding isn’t Trump — it’s China’s rebound from a scary late 2015 and early 2016. China’s growth didn’t slow much, but markets were seized by fear it soon would, and that cut U.S. growth by about half a percentage point, partly because it made the dollar BUXX, +0.00% spike.
Emerging markets still have room to run: Bank of America-Merrill Lynch thinks Asian EMs can double within two years, even after a recent 60% gain.