The Markets Confirm It — No Chance of a Trump Presidency

Yesterday, Trump made probably the most absurd suggestion so far.  As reported by the New York Times:

After assuring Americans he is not running for president “to make things unstable for the country,” the presumptive Republican nominee, Donald J. Trump, suggested that he might reduce the national debt by persuading creditors to accept something less than full payment.

Asked on Thursday whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.”

Can you imagine what would have happened to world financial markets if Obama, Clinton, Ryan, McConnell, had said that.  They would be in a tailspin, particularly the T-bond market.

But: the USA Today Headline is typical: Dow, S&P and Nasdaq end in the black after early slide.  And why?  Because of dissappointment about job creation numbers.

In other words, none of the people who move money around beleive the statement matters at all.  While it could be that some ignored it because they have learned that Trump means nothing that he says, and others made no moves because they have already discounted in the statistical chance of a President T, and whateve he migh do, but realistically that would only dilute the impact of his statement, not eliminate it.

Conclusion:  They know it is just not going to happen.

P.S. Even after Trump making it worse, and Wall Street reporting analytic reaction (Politico) , still no apparent movement in markets. (May 10, 10:00 AM, Eastern)

 

 

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One thought on “The Markets Confirm It — No Chance of a Trump Presidency

  1. Really great insight, Richard!

    But you might have thought that it would be Treasury bond markets who would react, and that a problem in bonds could help stock market. But no reaction in Treasuries: http://www.wsj.com/articles/u-s-government-bonds-hold-steady-following-jobs-report-1462541617 prices up and yields down.

    It is also possible that the markets don’t think Trump has zero chance of being President but rather that if he became President he has zero chance of sticking with this idea, which makes zero sense: http://www.economist.com/blogs/buttonwood/2016/05/trumps-latest-policy-idea While he sticks with some policies (the wall), there are tons that he voices and then just drops quickly. Still, the lack of reaction by any financial market shows some combination of belief that the probability of Trump Presidency is zero or close and the probability that Trump himself has any influence on economic policy if he becomes President is zero or close.

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