Recent election polling seems to show that potential voters don’t approve of anything in the Trump administration except its handling of the economy. One might argue that in comparison with supporting white racism, subverting the Justice Department, causing tens of thousands of Americans to die needlessly from the coronavirus and trying to corrupt the military, blunting economic growth is the least bad thing Trump has done.
It appears, however, the common belief is that Trump has actually done good things for US economic growth during his time in office and that on economic grounds he would be a better presidential choice than Joe Biden. (Personally, I think it’s a sign of the extreme poverty of domestic politics that the Democrats can’t come up with a better candidate than Biden but that’s another issue.) My opinion is that Trump is worse than economically clueless; I think he has been doing potentially incalculable damage to the long-term economic prospects of the country. If so, why don’t people realize this?
I think the explanation is in the financial results of Walmart (WMT), the largest retailer in the US. WMT’s target market is Americans of average and somewhat below average income. The company started in the midwest. Political action by incumbent retailers in California and the Northeast have limited its exposure to those areas. So it’s a reasonable thermometer for economic health in the rest of the country.
EPS growth for WMT over the past seven years is as follows:
year yoy eps growth
2019 +6.3%
2018 +11.1%
2017 +2.3%
2016 -5.5%
2015 -9.9%
2014 -0.8%
2013 +1.8%.
Note: Like many retailers, WMT’s fiscal year runs from February through January of the following calendar year. So, for example, what I’ve labeled as 2019 is actually 2/19 – 1/20.
What I read from these numbers is that recovery from the financial crisis of 2007-09 didn’t reach the large chunks of America that WMT services until almost eight years after the overall economy bottomed. This coincided with Trump’s election.
Did Trump cause this pickup or is it simply the “trickle down” of recovery to a a part of the country neither major party cared that much about? I don’t see anything in Trump’s past or present performance record to make me think it’s the former.
Did you read the time magazine piece about Jay Powell and the new world of unlimited cash?
Did you read the Time Magazine article on the new world of unlimited cash?
Steve
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The two big things I took from Powell’s comments are the near-term conclusions for investors: interest rates are going to stay very low for at least the next year, and the Fed is going to try to avoid incidents caused by the illiquidity of many parts of the bond market, by acting as a buyer of last resort for funds that might need to sell to meet redemptions. The second suggests there won’t be scary moments for bonds like when the price of crude oil went negative a short while ago. The first implies that the Fed is going to do absolutely nothing with money policy that will take any froth out of stocks for a long time.
I find it harder to interpret what Powell said about economic recovery post-pandemic taking much longer than most people expect. I don’t want to believe that’s right–although Powell has a much closer finger on the pulse of the economy than most. Is he saying that he’s done all he can (I think that’s true) and that it’s Congress’s job, not his, to mitigate further economic damage? Is it that he thinks the pandemic is the straw that will break the camel’s back for the US, given decades of economic negligence by politicians of all stripes? Is he warning that the administration’s continuing pandemic denial will have much deeper and longer-lasting negative economic effects than most realize? Is it simply that most other OECD countries seem to have the pandemic well under control, while we’re still at around 80% of peak cases and potentially rising? Or is it something else?