Market Overview

Trump's Approval Rating At Record Low, But Markets Tell A Different Tale

Trump's Approval Rating At Record Low, But Markets Tell A Different Tale

The world of President Donald Trump gets grimmer with the passing of each day, with his approval rating hitting new lows. However, the paradox seems to be the fact that the markets have turned a blind eye to some of his eccentricities and instead have cheered his leadership in a big way by hitting new highs.

Brewing Discontentment

Daily tracking poll results released by research and management consultancy firm Gallup said Trump's approval rating hit a new low of 37 percent last Friday, although it has seen a modicum of improvement since then. Gallup publishes data on presidential job approval based on the public's perception at a particular time.

The percentage of Americans approving the president's job performance dropped to 37 percent on March 18 a new low for the president. However, since then, it recovered to 40 percent Tuesday.

The highest approval rating the president has secured in his tenure thus far into his term was 46 percent, achieved on January 24 and 25. Subsequently, until mid-February, the approval rating was on a downhill path, hitting 38 percent on February 16 as Trump signed the infamous travel ban order.

Although things looked slightly up after that as the approval rating rebounded to 45 percent in March, it has been worsening since then.

Incidentally, former President Barack Obama's lowest approval rating during his eight-year tenure in the White House was 38 percent. George. W. Bush saw his rating slump as low as 25 percent.

Among races, Trump had earned the displeasure of non-whites, including African Americas and Hispanics; the 18–29 age group seems to be the most discontented.

Meanwhile, the percentage of people who disapprove Trump's job performance hit a high of 58 percent last Friday before dropping to 55 percent Monday.

Markets Unperturbed By Public Sentiment

Since the November 8 elections, the S&P 500 has added 9.74 percent and the Dow Jones Industrial Average 2 Minute has risen 12.69 percent.

After the post-election rally that led to the averages hitting new highs, they began to consolidate by the year-end. The consolidation continued into the new year before a fresh rally took hold by early February that lasted through early March when the averages went about a record breaking spree.

^SPX Chart
Source: Y Charts

With another round of consolidation happening, the averages are currently trading shy off their record closing levels (2,396 for the S&P 500 Index and 21,116 for the Dow, both hit on March 1), though with gains for the year-to-date period as well from the period the election results were announced.

Explaining The Divergence

The divergence between the approval rating and market performance since Trump's ascension makes a good subject for analysis. A few reasons that could have fueled the rally include:

  • Incoming data continuing to be robust: GDP growth is trending around the new normal, with the fourth-quarter 2016 GDP growth now estimated at 1.9 percent. The economy continues to add jobs at a frenetic pace and the housing market is on a tear. Consumer spending, the lifeline of the economy, is alive and kicking. Added to that confidence among consumers are businesses are elevated.
  • The tax reform "carrot" Trump is dangling: The corporate tax reform Trump promised during his campaign is set to trigger strong profit growth, as experts see the tax rate being slashed from the current 35 percent, a high among developed nations, to 20 percent. Additionally, the reforms would likely allow companies repatriate profits stashed overseas at a reduced tax rate.
  • The promise of massive infrastructure spending: This is seen to benefit the economy from its ancillary effect of job creation as well.
  • Fiscal stimulus envisioned.
  • Deregulation that is expected to help companies to shore up their top and bottom lines.
  • The "Make America Great Again" promise that has lent hopes of jobs flowing back into the U.S. and reviving the sagging industrial growth.

Promises are always rosy and easy to dole out. It's much more difficult, however, to keep those promises. The corporate-friendly policies flaunted by the Trump administration has served as an elixir for the markets. For a sustained outperformance, the markets may need more than promises. Thus, the spotlight would shift to the implementation part, if the rally has to be kept alive.

Related Links:

All Presidents Reach Majority Disapproval At Some Point, But Trump's 8-Day Record Is Unprecedented

Was The 'Trump Rally' Really Any Different From The Bush Or Clinton Rallies?
Image Credit: By The White House [Public domain], via Wikimedia Commons

Posted-In: Donald Trump gallupNews Education Politics Media Trading Ideas General Best of Benzinga


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