Editorial: Stock market fall rests with Trump

The Detroit News
Trump has little patience for Fed efforts to restrain the economy.

Barring a robust final week rally, the stock market is set to post one of its worst, if not the worst, Decembers since the Great Depression.

President Donald Trump last year touted the stock market's steep run-up as a tribute to his tax cutting and deregulation policies, and he was likely right. The promise of lower taxes and less burdensome regulations buoyed investors and pushed stock prices to record levels.

Now, with the markets in steady decline, the president hopes to detach the plunging performance from his policies.

Instead, Trump blames the Federal Reserve, which, worried that an overheated economy might trigger inflation, has been gradually pushing up interest rates.

Nice try, Mr. President. But the stock market drop rests in your lap.

Small hikes in interest rates can be expected once the economy finds its vigor. The pro-growth policies put in place during Trump's first year have led to higher profits and increased job creation, and thus a tighter job market.

Those are positive signs. But they can also drive up prices if the Fed isn't vigilant. Stock traders anticipate such responsible rate increases, and discount for them.

What's making investors wary is Trump's trade policies, and how they may affect growth in the New Year.

Particularly, the heavy tariffs on trade with China have unsettled tech sector investors, who were already skittish about internal problems within Apple, Google, Facebook, etc.

Other industries, such as automotive and agriculture, are uncertain how much further the trade war will escalate, and how much additional disruption to their businesses to expect. Uncertainty tends to keep investors on the sidelines.

So even though corporate profits are still solid, growth continues at a respectable pace and consumer optimism remains high, the stock market views 2019 as a major question mark.

The result is an end-of-year pullback. Chances are great that most investors will end 2018 with their portfolios in negative territory. And that will ultimately impact consumer confidence and risk creating a broader downturn.

This is all so unnecessary. Trump imposed the tariffs ostensibly to protect American jobs. But there are seven million job openings in the United States today, and not enough qualified workers to fill them. With the economy growing at a 3.5 percent pace, it was a poor time to engage in protectionism.

The tariffs could well trigger an artificial recession in 2019, meaning one caused by bad government decision making rather than economic factors. 

Pointing his finger at the Fed will not restore investor confidence. Calling a truce in the trade war will.

That's a stock-boosting move Trump must make ASAP.