After several months of being in office, economic pundits are all rushing to analyze and assess how Trump's economic performance has been in his time in office. It should be noted, however, that Presidents have historically been responsible for less to economic improvement than what is given credit and more for political and social changes that have indirectly led to economic changes. Fiscally, Presidents are able to impact how a nation's economy functions, however they must also work together with Congress to implement substantive change. Fiscal policy also does not account for monetary policy, or changes in the money supply and other financial and economic activities that are all handled by the Federal Reserve. Presidents are more influential in indirect economic forces and as such no one president should be held entirely accountable for whether an economy is doing better or worse. In reality there are a multitude of factors that need to be taken into in order to fully assess an economy's performance. That being said, a President's actions can either augment or hinder economic growth due to unnecessary regulation, lack of regulation in specific areas, harmful rhetoric, hopeful rhetoric, etc. It is now time to assess how the current President has impacted the economy in the short-term and to see what it's long-term implications are.
To begin with, under the Trump presidency the Stock Market, specifically the Dow Jones Industrial Average has reached new heights and has continued to increase significantly. The markets are overall pleased at the possible future outcomes the President has been advocating for. However, as I have said in previous articles, the Stock Market and Dow Jones are not total indicators of an economy's performance, but rather the stock market is its own entity that functions based off of heavy speculation and corporate earnings. The Stock Market reflects the attitudes of investors who may have several different backgrounds. Even expert investors have been shown to have a bad reputation when it comes to predicting, understanding and countering financial crises and economic catastrophes. Stock Markets are reacting favorably towards external factors other than the President's promises, like labor strength in renewable energy, job growth in strong technology giants such as Apple, Amazon and Microsoft as well as the strong job market left behind by Obama's presidency.
A more indicative factor of economic strength, particularly abroad is the strength of the US dollar against other currencies. To understand US economic strength as opposed to other major economic competitors (ex/ China, India, Germany) one must understand how important their currencies are. As of today, the US dollar is the strongest currency in the world and is accepted in most countries. It also takes the role of being a reserve currency, which is a significant currency other countries possess and build up as a form of reserve in the event that their own currency crashes or there is a significant economic crash and the foreign country needs to provide immediate liquidity into the economy.
However, in recent months the US dollar's strength has started to slip. Because of Trump's negative rhetoric about business and economic deals abroad and his continuing isolationist policies in regards to key economic partners, more countries abroad are selling their reserves of dollars for a basket of other currencies (namely the euro and Great British Pound) in an effort to hedge and reduce the possible risks of investing in the US. When a President speaks of detaching from the rest of the world to pursue policies for the best interests of his own country, it fuels animosity abroad. This is a president who has debated the idea of engaging in a trade war with China as well as retracting from the Paris Agreement and investment in global renewable energy projects. As a result, foreign investors, including governments, become more hesitant as US goods and services become increasingly less appealing due to the rhetoric and policies of an isolationist president. The decrease in the dollar's economic competitiveness means that US businesses and firms have less bargaining power abroad, which means less revenue and job growth at home.
As the President has only been in office for roughly 7 months it is difficult to speculate and analyze anything beyond these two factors as President Trump has barely done anything else that is economically significant. Economically speaking the President has done nothing in his first seven months and has latched onto the successes of his predecessor and the successes of the Federal Reserve as well as individual businesses operating independently of the President's policies. The President has not done much worth recognizing and the only impacts he has had on markets both domestic and foreign is based on speculation of the future.
