When the President Tells You To Buy Stocks, He’s Usually Right
It's election year for Donald Trump as he downplays the coronavirus threat whilst bullishly backing the stock market. History is on his side. | Source: REUTERS/Tom Brenner
- President Donald Trump hinted that investors should buy stocks yesterday, claiming the market looks “very good!”
- Last time Trump urged investors to buy, the S&P 500 rallied 35%.
- Obama did the same in 2009, right before the biggest bull run in history.
American presidents have an uncanny ability to move the stock markets. A single tweet or press statement can send traders into a buying frenzy.
So what should you do when Donald Trump gets on Twitter and tells you to buy stocks?
Probably buy ‘em!
Recent history shows that the stocks rally hard every time a sitting president urges investors to buy.
Trump says stock market looks “very good”
The U.S. stock market suffered its worst day in two years on Monday. The Dow Jones shed 1,000 points in a day as coronavirus nerves took hold of Wall Street.
But that didn’t dampen Trump’s enthusiasm. He took to Twitter to reassure the public and (not-so-subtly) suggest they buy stocks.
The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!
He was right last time…
The last time Trump told investors to buy was on Christmas Day 2008 . The stock market had suffered a 20% fall and was teetering on bear market territory .
I have great confidence in our companies. We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy.
Here’s what happened next…
Trump’s statement triggered the biggest one-day point gain in the Dow’s history. The stock market climbed another 35% to reach this year’s high.
We also know that Trump called in the ‘Plunge Protection Team,’ aka Working Group on Financial Markets to stop the markets falling too far. Treasury Secretary Steven Mnuchin called the heads of the six largest banks personally to ensure they had enough liquidity.
Obama moved the stock market too
We can go back further in time and see the same phenomenon with Obama. On March 3rd 2009, Barack Obama ended the recessionary bear market with a single statement .
What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it – Obama.
And here’s what happened next…
His statement marked the bottom of the 50% collapse in stocks… and kickstarted the longest bull market in modern history.
So, we can joke about Trump trying to resuscitate the stock market. But history tells us he’s probably right.
