If you looked at the politics section of the papers every morning, you would think that Washington was descending into chaos, with a corrupt president out of his depth, a foreign power pulling strings at the highest level of government, and democratic institutions on the verge of collapse. And yet, investors have rarely been more bullish about the future at the start of an administration. CNN reports:
The S&P 500 has gone up 3.8% since Trump took office.
That’s the biggest increase for a new Republican president since the blue chip index that eventually became the S&P 500 debuted in 1923, according to S&P DJ Indices. […]
To give credit where credit is due, the market is red hot right now. And Trump deserves some, albeit not all, of the credit for that.
And it’s not just Wall Street traders who are optimistic. U.S. consumer confidence ticked somewhat lower this month, but remains significantly higher than it was before the election. The New York Times notes that “the momentum is almost uniformly positive as the Trump era gets underway”—manufacturing output, retail sales, and housing construction have all been rising.
There are a few ways to address the dissonance between economic indicators and the media’s portrayal of the political scene. One interpretation is that the media is simply wrong—that investor and consumer confidence proves that the situation isn’t as dire as much of the establishment believes. People who need to put their money where their mouth is are betting on America; it’s only urban center-left reporters who are warning of imminent doom.
The second interpretation is that economic growth and democratic politics aren’t as interconnected as standard political science suggests, and that it’s entirely possible for the U.S. political system to be facing an existential crisis even as its economy booms. After all, the market is influenced by many factors outside the government’s control. Countries like China have enjoyed sustained economic growth despite being governed by authoritarian kleptocracies; perhaps America can do the same.
Whatever the underlying dynamic, the fact is that the relentless barrage of explosive headlines and scandals are much easier for the administration to weather in the context of a growing economic pie. The stock market boom, in particular, has probably helped temper concerns of business leaders and other economic elites. In the case of a slowdown, the floor could fall out from under Trump more quickly than he or his boosters expect.