Donald Trump’s administration might have just had its “Mission Accomplished” moment.
It began in India before the stock market opened Tuesday after a 1,032-point loss in the Dow (INDU). The president projected optimism as global markets reeled over coronavirus risks.
“I see the futures are up today, up substantially,” President Trump said. “That’s a very serious thing, but we think we’re in pretty good shape in the United States.”
Trouble is, global markets were down for a second day and futures were struggling to recover. Every attempt higher fizzled.
Then, to calm fears on Wall Street, the chairman of the president’s economic council, Larry Kudlow, appeared on CNBC and downplayed its impact in the United States.
“We have contained this – we have contained this. I wouldn’t say airtight, but pretty close to airtight,” he said.
And Kudlow again counseled long-term investors to buy the dips in the stock market.
Moments after Kudlow’s interview, the Centers for Disease Control reiterated the World Health Organization’s warning that coronavirus could become a pandemic and will inevitably spread in the United States.
While the message from the White House was to buy stocks, health officials advised that businesses, schools and households prepare.
It’s not new that the president acts as the cheerleader-in-chief for the stock market. A strong economy and soaring stocks are central to his re-election. What is new is the cheerleading amid a public health scare.
He has consistently argued that the Dow is a metric of his success as president. But if the coronavirus spreads in the United States, markets could panic, and the Trump administration could end up looking like George Bush on the battleship with that big “Mission Accomplished” banner behind him.
Joe Lockhart, who was the White House spokesman for President Bill Clinton, said traditional administrations steer clear of cheerleading the stock market for fear of losing credibility in a crisis. He prefers a Hurricane Katrina comparison.
“The president made very clear yesterday what his concern is,” Lockhart says. “Not the health of the public but the health of the economy and where the stock market is.”
“Getting re-elected should not be the priority. It’s counterproductive. If like Katrina you prove you can’t handle a public health crisis, you’re not going to get re-elected,” Lockhart says.
Trump’s credibility as a leader is being tested, said Greg Valliere, chief US investment strategist for AGF Investments.
“A disturbing pattern is recurring: Donald Trump appears to be muzzling the experts, sticking to happy talk that has no basis in fact,” Valliere writes in a note to his clients. “This has occurred repeatedly – Trump against the Weather Bureau, against climate experts, against his own generals, against the Federal Reserve, etc. And now there’s a disturbing battle between Trump and the Centers for Disease Control.”
Like the boy who cried wolf, he risks the public not believing him if a health crisis dings the economy. And this is the area where he gets the highest approval ratings.
By Wednesday morning, the president had reverted to more traditional presidential protocol. He tweeted support of the CDC, saying, “All doing a great job with respect to Coronavirus! Briefing this afternoon.”
Of course markets react and overreact. Even before the coronavirus fears worsened, economists at Goldman Sachs said the market was overdue for a correction. It’s impossible to know if the stock market’s trouble this week is the beginning of a stock market retrenchment or an overreaction.
The S&P 500 (SPX) lost $810 billion yesterday and $2.1 trillion since Wednesday, according to S&P Dow Jones Indices’ Senior Index Analyst Howard Silverblatt.
Kudlow’s advice to buy the dips is not so unusual – history shows over time it works. But it’s virtually unheard of to hear it in the middle of a crisis from the White House.