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Wall Street shifts to tuning out most Trump rhetoric: Like a boy who cried wolf

 

by Juliette MICHEL / Agence France-Presse

President Donald Trump, a big presence over Wall Street when he first took office with tweets targeting individual companies, appears to be losing much of his ability to move markets.

Investors are increasingly shrugging off the US president following a string of outrageous statements and legislative setbacks, analysts said.

“It gets to a point where it is a little bit about the boy who cried wolf,” said Art Hogan, chief market strategist at Wunderlich Securities. “You become immune to some of it.”

Trump himself has drawn attention to a string of stock market records, taking credit for the “virtually unprecedented” gains and ruing on Twitter that they haven’t received enough attention from the media.

Yet analysts see evidence that Trump’s words have less weight than they once did.

When Trump threatened to “totally destroy” North Korea during a fiery United Nations speech last month, the Dow Jones average climbed 0.2 percent.

Trump vow to lower the corporate business tax to 15 percent also didn’t register, because the “market knows that’s not realistic,” said Gregori Volokhine, president of Meeschaert Capital Markets.

When Trump lambasted Merck chief executive Kenneth Frazier for quitting a White House advisory council over the US president’s muted response to a violent white supremacist rally, shares of the drugmaker gained 0.5 percent.

“Unless some of the provocation come to fruition with real action, against one company or a country, the market has grown a bit immune to the constant barrage of tweets,” Hogan said.

“The markets react only when they realize that whatever the president says, it has some substance to it and is not just rhetoric,” said Charles Geisst, a finance professor at Manhattan College who has written extensively on the history of Wall Street.

– Smaller impact –

It’s not that Wall Street is completely dismissing Trump’s impact.

Stocks rallied after Trump’s surprise victory in November 2016 as investors embraced the hope that the mogul and a Republican Congress could enact tax cuts and other key growth measures.

That faith still holds in a broad sense judging from a string of Wall Street records since Trump unveiled the outline of his tax cut plan last month.

But there has been a shift from December, when Trump’s criticism of the high cost of the F-35 fighter jets prompted a 1.3 percent drop in Lockheed Martin shares.

Researchers Alexander Kurov of West Virginia University, and Qi Ge and Marketa Wolfe of Skidmore College analyzed the impact of Trump’s statements between his election and July 31.

The study showed Trump’s statements on average affected company share price 0.64 percent on average over the entire period.

However, the impact was much greater before the president’s inauguration on January 20, with shares moving on average 1.14 percent after being targeted by Trump.

Analysts say Trump’s failure to win congressional passage of health care reform has raised doubts about his influence in Washington, while his tit-for-tat barbs with North Korean leader Kim Jong Un was dismissed as largely empty rhetoric.

The US president has been further diminished by controversies such as a widely-condemned response to a Charlottesville neo-Nazi march that has weighed on his standing with the public.

Yet “even if Trump’s words can’t be taken too seriously, that is not to see they don’t correspond to real action,” Volokhine said.

“It’s clear Trump won’t probably ‘destroy’ North Korea, but he has hardened his position,” Volokhine said. “Trump won’t completely abandon the NAFTA treaty, which he has said is the worst ever, but he’s working to water it down significantly.”

And Trump is also sticking to his anti-regulatory bent.

“Regardless of the stupid things he says, or the promises he makes but can’t keep, the one thing he will do is to make sure that no new regulation will pass,” Geisst said.

“That is one thing that Wall Street understands.” (AFP)

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