The same day Democrats took over the House of Representatives, the stock market fell some 600 points. It’s a coincidence, driven largely by a shocking announcement from Apple — not, as President Donald Trump would like for you to think, by who is in charge of Congress.
Trump says Democrats are to blame for the stock market’s troubles. They’re not.
Thursday’s stock market slide was Apple’s fault, not Nancy Pelosi’s.
Emily Stewart covered business and economics for Vox and wrote the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.
In a Friday morning tweet, Trump suggested that Thursday’s market troubles were driven by Democrats taking control of the House in the 116th Congress.
“As I have stated many times, if the Democrats take over the House or Senate, there will be disruption to the Financial Markets. We won the Senate, they won the House,” he wrote, though he predicted that things would “settle down.”
This isn’t the first time Trump has suggested Democratic control of Congress would rattle Wall Street. Ahead of the 2018 midterms, he told voters that if they wanted their stocks to go down, “I strongly suggest voting Democrat.” And after the midterms, Trump suggested that Democrats’ plans to investigate him were causing the market “big headaches.”
The markets have been chaotic in recent months for a number of reasons — concerns about rising interest rates, trade tensions between the United States and China, and even just because stocks have been going up for so long that at some point, they would be expected to come down. It’s not because of who’s in charge of Congress in Washington, DC, in general or, specifically, this week.
Nancy Pelosi wasn’t the culprit of Thursday’s stock slide. Apple was.
There is never any single reason the stock market does what it does any given day, but a lot of what happened on Thursday had to do with Apple.
CEO Tim Cook late Wednesday warned investors that its revenue for its first fiscal quarter of 2019 would likely be less than expected because of “emerging market challenges” — namely, China — and slow iPhone sales. Apple’s share price subsequently fell by nearly 10 percent on Thursday and wiped $75 billion from its market cap.
It dragged the Dow Jones Industrial Average, which fell more than 600 points, down with it. The S&P 500 fell by some 60 points, and the Nasdaq fell by 202 points. Apple’s China woes have also sparked concerns other companies might face similar problems — including from White House Council of Economic Advisers chief Kevin Hassett, who told CNN on Thursday that a “heck of a lot of US companies that have sales in China are going to be watching their earnings be downgraded.”
But as Jessica Menton at the Wall Street Journal pointed out, it wasn’t just Apple that was the problem on Thursday, or that’s been an issue in recent weeks:
A confluence of factors from the Federal Reserve’s monetary policy to renewed U.S.-China trade tensions have weighed down financial markets in recent weeks. Adding to investors’ fears, manufacturing data around the world have pointed to slowing momentum.
It’s worth noting that markets opened higher on Friday, thanks to a strong jobs report that saw the United States add more than 300,000 jobs in December.
Trump just wants someone to blame for the markets when things aren’t going well
After years of an upward trajectory in the wake of the financial crisis, the stock market has become more volatile since about October of 2018. Last year was the worst year for stocks in a decade, with the Dow, S&P 500, and Nasdaq all ending the year in well in negative territory. The month of December was especially bad.
Trump, who at the start of his presidency sought to tether his success to the stock market, has now sought to point the finger elsewhere for its troubles. He has used the Federal Reserve and chair Jerome Powell, who he appointed, as a scapegoat, and publicly pushed Powell to keep interest rates low. And Trump has blamed Democrats, even though the day after the midterm elections the markets had a modestly good day.
The president has also started to take credit for other metrics that are currently more favorable to him, such as the price of oil and gas.
Stocks move for a multitude of reasons (and, for that matter, oil prices do, too), and it often has nothing to do with politics. Much of what’s been happening lately isn’t tied to the goings-on in Washington, and it wasn’t the case on Thursday, either.
Trump isn’t entirely bearish on his expectations for the markets. On Wednesday, he said that the stock market had experienced some sort of metaphorical “glitch” in December, but “once trade issues and a couple of other things happen,” it will go up again. And when it does, he will likely be excited to again start taking credit.
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