Why are stocks up today?

The obvious answer is that no one knows for sure. But let’s discuss some options:

Bloomberg points to expectations of fiscal stimulus.  But what news do we have today that would make fiscal stimulus more likely?  One can argue that the Georgia election results increased the likelihood of more stimulus, but that information was fully priced in yesterday morning, and indeed mostly priced in Tuesday night (when stock futures declined.)

Another possibility is the turmoil on Capital Hill yesterday.  You might expect that sort of chaos to hurt stocks, and indeed usually it would.  But in this case, one side effect seems to be a weakening of what one might call “Trumpism”.

A counterargument is that President Trump was good for stocks.  But it’s always important to think in terms of effects at the margin.  The Republican agenda of tax cuts and deregulation was probably good for stocks.  But that sort of policy would likely be continued by future GOP nominees.  On the other hand, Trump’s signature issues such as protectionism and immigration restriction were less popular on Wall Street.

Stock traders might view the week’s turmoil as being likely to nudge the GOP from Trump-style conservatism to a more palatable Mitt Romney approach (although I don’t think he would lead that movement.)  In addition, if Trump becomes less of a political force then the GOP may be better able to regain support from moderate voters, a prospect that Wall Street might view favorably.

I realize that this is all speculation on my part, but I would not rule out the possibility that this stock rally is about more than just the Georgia election.




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Trump supported lockdowns

President Trump is such an unusual politician that people (myself included) have trouble seeing him clearly. For instance, Trump is often seen as an opponent of lockdowns. But while he did often speak out against lockdowns during the waning days of the campaign, he actually supported them during the period they were most restrictive.  Here’s a NYT headline from April 22:

Trump Criticizes Georgia Governor for Decision to Reopen State

“I think it’s too soon,” said the president, who joined several mayors in questioning Gov. Brian Kemp, a Republican, who had said some businesses could resume on Friday.

And here’s a tweet from April 30:

And it’s not just lockdowns.  I could easily dredge up Trump quotes for and against masks, for and against testing, or for and against any of a number of other policies.

Trump needed substantial votes from two groups that had very different views on Covid-19.  One group, mostly made up of his “base”, included small businesses worried about the economic effects of lockdowns, libertarians opposed to mask mandates, and Hispanic workers who lost jobs due to lockdowns.  Another group included moderate Republicans in the suburbs with professional jobs, who were economically insulated from the crisis but worried about the effects on their health.

It seems to me that early on he sensed that there was a risk of going too far “right” on the issue, losing those swing suburban voters.  Later in the year, it became clear that the problem wasn’t going away and indeed was picking up again.  At that time, he decided to go down the final stretch by appealing to his base with an anti-lockdown message.

I’m not sure that Trump had any good options politically (once the epidemic was out of control), although it’s intriguing to speculate as to what would have happened if he had followed me in questioning the experts (skeptical) view on masks back in early March.  The actual issue in which Trump questioned the experts (chloroquine) didn’t seem to pan out for him in the end, but by late April, experts throughout the world had basically decided that masks were indeed the way to go.  It might have been a big political win for Trump if he’d been ahead of the experts.  In addition, masks are a more attractive solution for small businesses than lockdowns.  In conservative Mission Viejo, almost everyone wears mask when in stores.  In contrast, very few people in North Dakota wore masks, and now they are paying the price.

When politicians encourage people to voluntarily wear masks, they are actually promoting liberty.  That’s because the more people that wear masks, the less political pressure there will be for lockdowns.


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