How the Stock Market Will Cripple Donald Trump – Vanity Fair

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By Alex Wong/Getty Images (Trump), By Jason Larkin/Getty Images (Stock Market).

As Donald Trump heads off for a two-week vacation at his golf club in Bedminster, New Jersey (not to be confused with his other 20-odd golf excursions since his inauguration, according to Politifact), it is worth noting how few of his many campaign promises he has actually accomplished in office. Trump, among other things, has not drained the swamp; or signed a health-care bill; or signed an immigration-reform bill. He has not revamped the tax code. He has not signed, or proposed, an infrastructure bill. Despite having control of both chambers of Congress, the executive branch has proven itself to be incapable of executing. If he had a board of directors, Trump would have been fired long ago.

Trump enthusiasts, for their part, point to two pivotal accomplishments since January 20. One is the confirmation of the conservative Neil Gorsuch as the 113th justice to the Supreme Court. (No need here to reiterate that Gorsuch’s seat really belongs to Merrick Garland, whose appointment was blocked by the heinous maneuvering of Senate Republicans, led by the Machiavellian tactics of Mitch McConnell, during Barack Obama’s final year as president.) Gorsuch is only 49 years old, which means that he is going to be around for a long time. Who knows how it’ll all play out in the years to come, but his vote will likely mean a repeal of many of the rights and privileges most Americans have come to take for granted. Give Trump credit: he got Gorsuch appointed, even though we will ultimately be lamenting it.

Trump’s other (and far more trumpeted) accomplishment has come to be known as the Trump Bump, which is code for the stock market’s inexorable rise since he unexpectedly won the election last November. Since market futures for the Dow Jones Industrial Average that night were heading toward a 1,000-point drop, the D.J.I.A. has been on a tear, reaching one new high after another. The D.J.I.A. is up around 20 percent since Election Day. With few other accomplishments to boast about, Trump is more than happy to take credit for the market’s rise. On August 3, he tweeted: “Business is looking better than ever with business enthusiasm at record levels. Stock Market at an all-time high. That doesn’t just happen!”

Video: How Long People and Policies Last With Donald Trump

True, it doesn’t just happen. But Trump would be wrong to claim sole responsibility for the bounce, as he seems to delight in doing. There are many factors that explain the current bull market in stocks, which started in March 2009, when the D.J.I.A. hit a low of 6,500 in the wake of the worst of the 2008 financial crisis. He won’t do it, of course, but Trump should be thanking Obama and the Federal Reserve, whose policies—re-equitizing the Wall Street banks, buying up trillions of dollars of toxic assets from the banks’ balance sheets, and keeping interest rates at unnaturally low levels—collaboratively resulted in the Dow’s rise to around 18,000 in the year before Obama left office. That’s a nearly three-fold increase. The Fed’s balance sheet has expanded to some $4.5 trillion, up from some $800 billion before the crisis. While ignoring a near tripling of the stock market under Obama, Trump is crowing about the 20 percent rise that has occurred in the D.J.I.A. since his election.

The real story behind the rise in the stock market is, as you might imagine, more complicated than Trump might be suggesting. During his tenure as chair of the Federal Reserve, Ben Bernanke created so much artificial demand for bonds that he drove up the price of bonds while pushing yields down (the yield on bonds moves inversely to their price). The effect of Bernanke’s gamble was to lower short-term interest to as close to zero as they have ever historically been. The so-called Zero-Interest-Rate Policy, or Z.I.R.P., has left investors with little choice but to invest in the stock market since investing in high-priced bonds has become a sucker’s trade.

With so much capital flowing into the stock market in search of higher returns than high-priced bonds can offer, it is no mystery why the stock market increased during the eight years of Obama’s tenure. On a risk-adjusted basis, there was no better place to invest than in the U.S. equities markets. That trend has continued under Trump. Although the Fed has stopped buying bonds—and it is slowly trying to shrink its balance sheet—both short-term and long-term interest rates still remain at historically low levels. With bonds too risky, investors have little choice but to invest in stocks.

The gains that have occurred since Trump’s election reflect not only the Fed’s Z.I.R.P. policies, but also Trump’s campaign promises. His assurances about tax cuts, repatriating corporate profits, and deregulating Wall Street, among others, have enchanted Wall Street traders and equity investors. The rise in the Dow from around 17,500 to 22,000 in the past nine months reflects their uncritical bet that Trump will be able to actually accomplish what he pledged to do. But, for unfathomable reasons, the market seems to be ignoring the fact that Trump cannot get anything done, despite the Republican Party’s control of both chambers of Congress.

But Wall Street investors—those in the business of making money from money, picking winners, and hedging risk,—aren’t going to stick with Trump forever. His inability to execute is discouraging. Investors are bound to lose faith in him. Combined with the fact that Congress doesn’t like the guy, and Capitol Hill Republicans appear increasingly unafraid that a dimwitted tweet might get them primaried, the truth is that Trump is going to have a very hard time enacting any of his economic promises into laws that he can sign. And when the market figures that out—which shouldn’t be too long from now—we are in for a huge correction, just in time for autumn, when for whatever reason, the market likes to get skittish.

That’s likely to happen even before Robert Mueller gets indictments out of a grand jury or North Korea launches another round of intercontinental ballistic missiles. And it will mean that Trump, who fancies himself as a masterful businessman, will have to explain the stock market’s slide in peripatetic 140-character bursts just as the rest of his political world closes in on him. Even Trump, given all his bluster about marketing and optics, should be smart enough to know that the stock market has only one direction to go now that it’s cracked 22,000—and that’s down.

Full ScreenPhotos:

Transgender Troops React to Trump’s Ban

__Brynn Tannehill__

Brynn Tannehill

Rank/branch of military: Lieutenant Commander, U.S. Navy. In the reserves until July 1, 2017
Hometown: Phoenix, AZ
Proudest moment: “All the years of training and dedication came together for me in those moments where I was there for my shipmates when they needed me the most. They survived because we were there.”
Biggest misconception: “The idea that it’s too expensive to retain transgender service members is laughable to me. It costs more to replace two highly trained transgender service members than to provide health care for every last one of them.”

Photo: Photograph by Justin Bishop.

__Allyson Robinson__

Allyson Robinson

Rank/branch of military: Captain, U.S. Army
Hometown: Scranton, PA
Proudest moment: “Taking command of my first platoon after I graduated from West Point. Leading American soldiers is the single greatest honor I’ve ever received.”
Biggest misconception: “People often assume I joined the Army to ‘make a man out of myself.’ I didn’t. I joined the Army out of a sense of gratitude for all I’d been given by this country.”

Photo: Photograph by T.J. Kirkpatrick.

__Kristin Beck__

Kristin Beck

Rank/branch of military: Senior Chief, U.S. Navy SEALs
Hometown: Wellsville, NY
Proudest moment: “I saved the life of an Afghanistan man in the middle of chaos. I also saw him later on and was able to have tea with him.”
Biggest misconception: The idea that this is a new issue. “Transgender people have been serving since the Revolutionary war, and most of us don’t cost a thing.”

Photo: Photograph by T.J. Kirkpatrick.

__Blake Dremann__

Blake Dremann

Rank/branch of military: Active Duty Navy Lieutenant Commander
Hometown: St. Louis, MO
Proudest moment: “The day I qualified in submarines and was pinned with my dolphins.”
Biggest misconception: “We are obsessed with transitioning and cannot function or do our jobs. Many transgender service members are at the top of their game and they only get better when they are allowed to transition.”

Photo: Photograph by T.J. Kirkpatrick.

__Laila Ireland__

Laila Ireland

Rank/branch of military: Retired Army Corporal, worked as a Health-care Management Administration Specialist Hometown: Waipahu, HI What is your proudest moment in the service? “Knowing that the solider was going to be able to go home to their family was and is always the most satisfying part of my career.” What is the biggest misconception you’d like to correct? “The most common one in my opinion is that transgender people are incapable of fulfilling a duty because they are mentally unstable. In order to serve in these roles, you have to be mentally sound.”

Photo: Photograph by T.J. Kirkpatrick.

__Jacob Eleazer__

Jacob Eleazer

Rank/branch of military: Captain, Kentucky National Guard. Currently serving in the 198th Military Police Battalion as the Senior Human Resources Officer
Hometown: Lexington, KY
Proudest moment: “Being selected as T.A.C. (Teach, Assess, Counsel) officer of the year. It meant a lot to me to know that both my soldiers and command thought so well of my work, even as the Army was processing me for involuntary discharge due to being transgender.”
Biggest misconception: “That being transgender is the most important part of who we are. I am proud to be a transgender man, but when it comes down to it, I am a commissioned officer in the United States Army.”

Photo: Photograph by Jacob Roberts.

__Logan Ireland__

Logan Ireland

Rank/branch of military: Active Duty Sergeant in the U.S. Air Force
Hometown: Flower Mound, TX
Proudest moment: “To be fortunate enough to see the policy change for transgender military members like myself. To see my brothers and sisters no longer have to serve in silence is a humbling experience.”
Biggest misconception: “We only want to serve in the military to have our transitions paid for. At no point is my military service about me; it’s about those who came before me.”

Photo: Photographed by Matthew Mahon.

<strong>Brynn Tannehill</strong>

Brynn Tannehill

Rank/branch of military: Lieutenant Commander, U.S. Navy. In the reserves until July 1, 2017
Hometown: Phoenix, AZ
Proudest moment: “All the years of training and dedication came together for me in those moments where I was there for my shipmates when they needed me the most. They survived because we were there.”
Biggest misconception: “The idea that it’s too expensive to retain transgender service members is laughable to me. It costs more to replace two highly trained transgender service members than to provide health care for every last one of them.”
Photograph by Justin Bishop.

<strong>Allyson Robinson</strong>

Allyson Robinson

Rank/branch of military: Captain, U.S. Army
Hometown: Scranton, PA
Proudest moment: “Taking command of my first platoon after I graduated from West Point. Leading American soldiers is the single greatest honor I’ve ever received.”
Biggest misconception: “People often assume I joined the Army to ‘make a man out of myself.’ I didn’t. I joined the Army out of a sense of gratitude for all I’d been given by this country.”
Photograph by T.J. Kirkpatrick.

<strong>Kristin Beck</strong>

Kristin Beck

Rank/branch of military: Senior Chief, U.S. Navy SEALs
Hometown: Wellsville, NY
Proudest moment: “I saved the life of an Afghanistan man in the middle of chaos. I also saw him later on and was able to have tea with him.”
Biggest misconception: The idea that this is a new issue. “Transgender people have been serving since the Revolutionary war, and most of us don’t cost a thing.”
Photograph by T.J. Kirkpatrick.

<strong>Blake Dremann</strong>

Blake Dremann

Rank/branch of military: Active Duty Navy Lieutenant Commander
Hometown: St. Louis, MO
Proudest moment: “The day I qualified in submarines and was pinned with my dolphins.”
Biggest misconception: “We are obsessed with transitioning and cannot function or do our jobs. Many transgender service members are at the top of their game and they only get better when they are allowed to transition.”
Photograph by T.J. Kirkpatrick.

<strong>Jennifer Long</strong>

Jennifer Long

Rank/branch of military: Army Sergeant Major, retired in 2012
Hometown: Jersey City, NJ
Proudest moment: “My service in Afghanistan in 2010–2011. I was awarded the French National Defense Medal, the first American to receive that medal since World War II.”
Biggest misconception: “Expensive, complicated surgeries would make them non-deployable or [reduce their] effectiveness.”
Photograph by Justin Bishop.

<strong>Sheri Swokowski</strong>

Sheri Swokowski

Rank/branch of military: Colonel, U.S. Army. Retired December 4, 2004, after 35 years of service.
Hometown: Manitowoc, WI
Proudest moment: “I was the first woman to (legitimately) wear an infantry uniform after my DD 214 was changed to reflect my authenticity. I wore that uniform at [a] Pentagon Pride Event and [the] White House Pride month reception in June 2015.”
Biggest misconception: “Some people, particularly the older generation, believe trans individuals are mentally ill. Being transgender is a medical condition, no different than someone suffering from diabetes or heart disease. All medical conditions are deserving of treatment.”
Photograph by Kevin Miyazaki.

<strong>Jennifer Peace</strong>

Jennifer Peace

Rank/branch of military: Active Duty Army Soldier, Intelligence Officer
Hometown: Houston, TX
Proudest moment: “The day I took command of a company. It was something I had given up hope on ever doing after deciding to transition, assuming that my career would be over.”
Biggest misconception: “I think what it all comes down to is this stereotype people have of who trans people are. Once you work with someone and know someone personally, it breaks those stereotypes down.”
Photograph by Robbie McClaran.

<strong>Laila Ireland</strong>

Laila Ireland

Rank/branch of military: Retired Army Corporal, worked as a Health-care Management Administration Specialist Hometown: Waipahu, HI What is your proudest moment in the service? “Knowing that the solider was going to be able to go home to their family was and is always the most satisfying part of my career.” What is the biggest misconception you’d like to correct? “The most common one in my opinion is that transgender people are incapable of fulfilling a duty because they are mentally unstable. In order to serve in these roles, you have to be mentally sound.”
Photograph by T.J. Kirkpatrick.

<strong>Jacob Eleazer</strong>

Jacob Eleazer

Rank/branch of military: Captain, Kentucky National Guard. Currently serving in the 198th Military Police Battalion as the Senior Human Resources Officer
Hometown: Lexington, KY
Proudest moment: “Being selected as T.A.C. (Teach, Assess, Counsel) officer of the year. It meant a lot to me to know that both my soldiers and command thought so well of my work, even as the Army was processing me for involuntary discharge due to being transgender.”
Biggest misconception: “That being transgender is the most important part of who we are. I am proud to be a transgender man, but when it comes down to it, I am a commissioned officer in the United States Army.”
Photograph by Jacob Roberts.

<strong>Logan Ireland</strong>

Logan Ireland

Rank/branch of military: Active Duty Sergeant in the U.S. Air Force
Hometown: Flower Mound, TX
Proudest moment: “To be fortunate enough to see the policy change for transgender military members like myself. To see my brothers and sisters no longer have to serve in silence is a humbling experience.”
Biggest misconception: “We only want to serve in the military to have our transitions paid for. At no point is my military service about me; it’s about those who came before me.”
Photographed by Matthew Mahon.