A Presidential Influence

Chester James Carville Jr. is not a name immediately recognisable to those unfamiliar with the inner workings of politics. But to those striding the corridors of power, Chester is something of a guru. His political strategy on Bill Clinton’s campaign trail in the 1990s proved to be hugely influential with subsequent generations.

To help Clinton beat George H. W. Bush in 1992, Carville formulated a range of slogans to capture the mind of the typical American voter. “Change vs more of the same” was a masterstroke, playing on the allure of progression and the fear of stagnation. “Basic healthcare to all Americans” struck an inclusive tone and highlighted an issue close to many.

However, it was the slogan hung in Bill Clinton’s campaign headquarters in order to keep the future president on message that is perhaps Carville’s greatest linguistic legacy. “The economy stupid” or the adopted variation “It’s the economy, stupid” has become a snowclone repeated countless times in the political realm.

From the White House to Number 10, politicians are only too aware that constituents who feel safe in their job and have money in their pocket tend to stay loyal to the leader that put it there. But how much of an impact does politics have on the economy? As the two become increasingly intertwined, especially in the US, it seems that although a misfiring economy can bring down a president, a misfiring president is not always enough to bring down an economy.

A characteristic of Donald Trump’s presidential tenure has been the pandemonium surrounding him and his ever changing roster of advisors. His catchphrase from hosting The Apprentice, “You’re Fired” is one that has stayed with him right to the White House. Since Trump took his seat in the Oval Office, the list of departures and resignations of aides and allies has lengthened rapidly.

The list of over 35 exoduses extended further as top economic advisor, Gary Cohn resigned and Trump ousted his Secretary of State, Rex Tillerson. Turnover has been higher in Trump’s first year than in his five predecessors’ equivalent periods put together and is more than triple that of Obama’s first year.

By embracing impromptu meetings with North Korea’s equally unpredictable Kim Jong-un and imposing hefty tariffs on foreign imports, Trump has blindsided and alienated his most respected aides. Couple this with allegations of his election campaign’s links to Russia and an ongoing impeachment case and Trump’s premiership thus far hasn’t inspired much confidence.

With many commentators worrying what will be tweeted from the president’s account next, you could be forgiven for thinking that the bedlam surrounding the White House would have had a detrimental effect on the nation’s economy. At present, it is far from it.

Since Trump’s election victory and until very recently, both global markets and business confidence have soared higher and higher, almost in unison. Recent surveys suggest business owners have not been this bullish on the economy since 1983, with Trump’s tax cuts playing a significant part.

Such buoyancy has elevated corporate investment, spending levels and recruitment. The US labour market also continues to heat up with unemployment falling to 4.1% and stronger wage growth starting to manifest, in turn ramping up consumer confidence. Company earnings are also on the rise, pushing stock markets to break record levels almost weekly during 2017.

It all contributes to an economy that looks and feels good. Even the US Federal Reserve has had to admit that the economy has strengthened well beyond their estimates over the past year. Its seems that for all the influence the President of the United States is meant to have, businesses and households have learnt to either tune out or put into perspective Trump’s blustering statements.

Of course, speak to any Democrat and they will tell you that recent stock market rallies aren’t Trump’s to derail anyway. For all the talk of tax cuts and banking deregulation spurring on the S&P 500 during Trump’s first year, US economic fundamentals were strong even before he got the keys to the White House.

Interestingly, the US added more jobs during every single year of Obama’s final term than it has done under Trump so far. It was also the Democrats that oversaw aggressive central bank easing, rescuing America from the grips of the financial crisis. The global economy continues to enjoy widespread, synchronised growth, cloaking Trump’s domestic troubles and sustaining US expansion.

With an apparent lack of seasoned counsel surrounding him, it has often been claimed that Trump acts as his own political advisor, sending unscreened tweets and refusing to say what is recommended. However, there may be some wisdom hidden away somewhere.

At a recent forum, Trump sat down to answer questions from millennials looking to enter the world of business. When asked what advice he would give himself at 25, he replied that he would have advised himself not to run for president. Although said in a tongue in cheek fashion, the sentiment rings true for a president who has aspirations of making a meaningful difference in making America’s economy “great again”.

A Presidential Influence first appeared in the Cumberland Place Newsletter for April 2018. Click here to view a PDF version.

 

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This article is for information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments, or to provide investment advice or services. The mention of any specific shares or bonds should not be taken as a recommendation to deal. Any opinions expressed in the Investment newsletter are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

 

Tags: Analysis, Economy, Investment, Market, Newsletter

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