The stock market looks set to open at a new record high on Thursday as Donald Trump and the Republicans strengthen their grip on the White House. Dow Jones Industrial Average (DJIA) futures pushed 100 points higher overnight.
Investors are increasingly bullish on the prospect of Trump holding onto the presidency for a second term. According to Gallup’s latest poll, the president is going into the 2020 election with his best approval rating on record. Republicans are more united than ever while the Democrat campaign descends into chaos.
Even more telling is Trump’s handling of the economy. According to the same Gallup poll, 63% of Americans approve of the way Trump is managing the economy. That’s the highest of any president in almost 20 years.
Dow Jones futures contracts got a boost in overnight trading as the Senate cleared Trump of all impeachment charges. Momentum faded slightly in the early hours of Thursday but the stock market still looks poised to open at fresh highs.
The real driving force behind this market is politics. This Bloomberg chart shows the S&P 500 moving in lockstep with Trump’s probability of re-election.
The president knows this, which is why he touts the Dow Jones as a proxy for his success. In this week’s State of the Union address, he put a spotlight on the stock market under his lead.
Since my election, United States stock markets have soared 70 percent, adding more than $12 trillion to our Nation’s wealth, transcending anything anyone believed was possible… All of those millions of people with 401(k)s and pensions are doing far better than they have ever done before with increases of 60, 70, 80, 90, and even 100 percent.
Admittedly, the numbers above are exaggerated. And the stock market performed equally well or better in the first three years of Bush and Obama’s tenure.
The numbers in Gallup’s latest poll are impressive. The Republican party has united around Trump’s leadership with a whopping 94% approval rate within the party. As expected, the impeachment fiasco did nothing but strengthen Trump’s base.
The approval rating was strengthen by Trump’s military action in Iran (53% approved) and his early trade deal with China (50% approval on foreign trade).
All this puts him in a commanding position going into the 2020 election.
It’s no secret the stock market favours a Republican presidency. Many investors have predicted a 30-40% crash under Bernie Sanders or Elizabeth Warren. Who can forget hedge fund manager Leon Cooperman’s warning about Warren:
They won’t open the stock market if Elizabeth Warren is the next president.
In reality, the fear mongering about Democrats handling the economy is exaggerated. The stock market returned 175% under Obama and 211% under Clinton. But with moderate candidate Joe Biden struggling in the Iowa caucuses, investors are on edge about the prospect of a left-wing candidate.