President Donald Trump and his advisers attempted to boost investor sentiment after US equities suffered their worst fall in two years on Monday, suggesting to Americans they should increase their exposure to the stock market.
Mr Trump, who has frequently cited the rising stock market as a measure of the success of his presidency, tweeted after the fall that the US stock market was “starting to look very good to me!”. The coronavirus outbreak whose spread triggered the sell-off was “very much under control in the USA”, he said.
His comments were followed up by Larry Kudlow, the top economic adviser at the White House, who said in an interview with the Washington Post that investors “should seriously consider buying these dips”.
Markets continued their fall on Tuesday after news of more cases in Europe dimmed hopes the outbreak would be contained quickly.
Global stocks, which fell 3 per cent on Monday, were down a further 1 per cent by mid-morning trading in New York on Tuesday and investors once again sought cover in safe-haven assets including government bonds, pushing yields lower. The yield on the 10-year US Treasury fell to 1.33 per cent, just above its record low.
“When [Mr Trump] tries to pump the stock market through his tweets he’s trying to bolster his own approval rating ahead of the next election,” said Hugo Rogers, chief investment strategist at Deltec. “We think the correction is justified and we don’t think it’s useful to pump retail investors into the market. Institutional investors are much more cautious.”
Anik Sen, global head of equities at PineBridge, said a sell-off was “incredibly healthy”, adding: “Anything that goes up in a straight line becomes very vulnerable to exogenous shocks.”
Mr Trump is an outlier among US presidents, who have rarely talked about the level of the stock market. In March 2009, Barack Obama made a comment about the market at the depths of the financial crisis, saying that “buying stocks is a potentially good deal if you’ve got a long-term perspective on it”.
Mr Trump often brings up equities on the stump. In Las Vegas over the weekend he said journalists were hoping for a big fall in the equity market because it would jeopardise his re-election. At a rally in Phoenix in February he tallied up “144 records, record stock markets. And you know what that means: that is your 401(k)s are up 60, 70, 80, 90, 100 per cent.”
On Tuesday, during his visit to India, the US president tied the fortunes of the equity market to his own election prospects.
The market will “jump thousands and thousands of points if I win,” he said, “and if I don’t, you’re going to see a crash like you’ve never seen before . . . I really mean it.”