President Trump loves to use the stock market as a measurement of success, but only when it suits him.
"Dow just broke 25,000," the president tweeted on Tuesday. "Tremendous."
Only, the Dow Jones Industrial Average first traded over that milestone 55 weeks earlier. There was not a word from the tweeter-in-chief when the stock index most recently dove below 25,000 in early December.
In the week ahead the president will deliver his delayed State of the Union speech. No doubt he will declare the state of the union is strong. He will rightfully brag about the low unemployment rate, job creation and tax cuts. Since March, there have been more job openings each month than people unemployed and looking for work. The state of the economic data is strong.
But the fundamentals are stoking fear in the stock market.
Consumer confidence is waning. The threat of another partial government shutdown looms over next week. Another round in the tariff trade war with China is due in a month. Corporate earnings growth is slowing. The federal budget deficit has spiked. More people believe the direction of the economy is getting worse than those who believe it is getting better, according to Gallup. The survey finds a stark split between how Republicans feel about the economy (83 percent optimistic) vs. Democrats (74 percent pessimistic).
Meantime, despite the initial stock market rally last week, the Federal Reserve isn't exactly sowing confidence. Its official statement explicitly said it would be patient with any future interest rate hikes. In a separate, but much less publicized statement the central bank said it is ready to "adjust" the shrinking of its balance sheet. For about a year, the Fed has been rolling off $50 billion of bonds per month by allowing them to mature and not reinvesting. These declarations hint to a Fed quickly turning cautious.
Stock investing requires honest optimism, not blind faith.
