General Question

crazyguy's avatar

Is it good to see that the stock market did not react much to the news about Trump?

Asked by crazyguy (1363points) 1 month ago

Early this morning DJIA futures dived upon learning that Trump and Melania tested positive for Covid-19. At close of trading only the NASDAQ had taken it on the chin, down over 2%. The Dow was down under half a percent, and the S&P 500 finished down less than 1%.

It appears that Trump personally is not as important for the stock market as people may have thought. Is that good news going forward?

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22 Answers

RedDeerGuy1's avatar

It is a Friday. Wait for Monday morning.

Pandora's avatar

I’ve been saying that for years. People are not going to divest or invest because Trump is dead or alive or sick or well. Now policies can affect certain investments.

crazyguy's avatar

@RedDeerGuy1 I assume you are predicting a blood bath on Monday? Or are you predicting a raucous rally?

RedDeerGuy1's avatar

@crazyguy Both. I don’t know if it would end up plus or minus. I hope that nothing happens.

crazyguy's avatar

@Pandora I agree it is never about a person, but about his/her policies. I do think Wall Street likes Trump’s policies; however, I think Wall Street believes the following:

1. He will recover in a week or two.
2. Even if he does not and passes on the mantle, Wall Street does not expect a significant change in policy.
2. Either he or Pence will win four more years, or Biden will be unable to keep his promise to raise corporate taxes.

JLeslie's avatar

It’s October, if it’s like most Octobers the stock market is going to go down no matter what. I just put in my calendar last week to contribute to my IRA the end of October for 2020. I always forget and then regret it.

When Reagan was shot my dad had the day off because of it, and he and I went out shopping or to a restaurant, I don’t remember which. As we crossed the parking lot at the shopping center I keenly remember him telling me that in other countries there can be civil unrest when a president is shot, but in America we have clear laws what happens next. Ironically, this is has to do with smooth transition of power, which has come up recently if Biden wins, but it also has to do with situations like the president becoming incapacitated.

The country is “stable.” As stable as it can be with high unemployment and covid. I don’t think it will have a very significant affect.

Tropical_Willie's avatar

The stock market does not like surprises:

1) Trump tests positive for COVID-19 Suprise

2) Trumps get s hospitalized SUPRISE

3) . . . .

Monday will not be regular trading day !

Irukandji's avatar

Only 18.7% of Americans directly own stocks, with another 28% being indirectly involved in the market through their retirement plan. So the news is best for those with the least need for good news. Besides, we’ve seen over and over again that the market can make as much profit off of misery and disaster as it can off of fulfillment and success. I’ll celebrate when the economic recovery becomes a rising tide that lifts all boats instead of a plane that rises by jettisoning its drop tanks.

filmfann's avatar

They waited until the market was closed before announcing he would go to the hospital.

stanleybmanly's avatar

The thing to keep in mind is that the market hasn’t reacted—YET

johnpowell's avatar

“It appears that Trump personally is not as important for the stock market as people may have thought”

Gotcha. You do realize this goes both ways.

crazyguy's avatar

@johnpowell I think the stock market will react to good news on his recovery prospects. Because his vigor and continued presence are the only sure way of continuing his policies.

@stanleybmanly Usually, the first day’s reaction is the most pronounced.

@filmfann On purpose, was it?

@Irukandji Over 50% of workers own 402(k)s which would give them some access to the stock market.

stanleybmanly's avatar

And if he dies?

gondwanalon's avatar

Wait until Biden/Harris are elected President. Then you’ll a tremendous drop in all the stock markets around the world.

hmmmmmm's avatar

@gondwanalon: “Wait until Biden/Harris are elected President. Then you’ll a tremendous drop in all the stock markets around the world.”

Yes. The candidate that corporate America chose is going to cause a tremendous drop “in all the stock markets around the world.”

During breakfast this morning, my blueberries recited the pledge of allegiance backwards and to the tune of the Folger’s coffee commercial jingle.

zenvelo's avatar

Yesterday’s market was a reaction to two things:

1. Asian markets were closed for holidays, so overnight futures sold off on Trump news, which set the tone for the opening. But the market has factored in a Biden win so it shrugged off the Trump news.

2. The unemployment numbers came out and were a drag on the market, because Trump has messed things up so much it is going to be a long time to recover the employment picture.

I was watching the futures numbers in real time before the NY opening, and that is how they reacted. That set the mood for the day, and why the overall market numbers were hardly off half way through the session.

Irukandji's avatar

@crazyguy Over 50% of workers own 402(k)s which would give them some access to the stock market.

I think you’ll find that 0% of American workers have 402(k)s. And while 59% of American workers have access to a 401(k) plan, only 32% of American workers are actually invested in one. Access to a retirement plan is not the same as having a retirement plan, and many workers are not in a position to devote any significant portion of their income to their retirement.

For those wondering how the math on this works out given the numbers I posted above, remember that most people who are invested directly in the stock market are also invested indirectly through retirement programs. The 28% number refers to people who are indirectly invested but not directly invested. Once we take into account the overlap, we see that less than 50% of American workers (18.7% + 28% = 46.7%) are invested either directly or indirectly in the stock market.

crazyguy's avatar

@Irukandji By drawing attention to an obvious typo you are proving yourself to be as petty as I expected.

Let me correct your numbers. 79% of all American workers have access to a 401(k) plan – see https://www.fool.com/retirement/2017/06/19/does-the-average-american-have-a-401k.aspx

Strangely enough, your 32% figure does check out. The remaining 47% who have access to, but do not use 401(k)s are not the same 47% that Mitt was talking about but there is probably a lot of overlap. How can anybody be so stupid as to ignore an employer’s match on 401(k) contributions, or, if there is no match, the advantages of tax-deferred savings?

Irukandji's avatar

@crazyguy Oh, get over yourself. Fluther has a long tradition of snarking over typos due to the high writing standards that we are held to. If I had wanted to be petty, I could have just left it at that instead of dedicating the overwhelming majority of my answer responding to the actual substance of your claim.

Also, you are using 2017 numbers. I am using 2020 numbers (and since the numbers are from March, there should be minimal interference from the pandemic). And in any case, it’s the 32% figure that matters to the point I was making since I am talking about actual investment rather than mere access.

As for why there are people who have access to a 401(k) plan who do not take advantage of that access, it is strange that you assume they must be stupid. Some of them might be uninformed (since cuts to public education have forced most schools to cut those classes that were devoted to this sort of practical learning), but many simply cannot afford to contribute a part of their income to a retirement plan. And others may be early enough in their career that they are currently in a lower tax bracket than they will be when they retire (meaning they will pay less if taxed now than if taxed later).

crazyguy's avatar

@Irukandji I went to your link. However, it seems to have tables containing overlapping info. Which table did you rely on for your numbers?

You make some valid points about why a worker who has access to a 401(k) may decline to use it. The only one of your points that I cannot refute is that about a worker being in a lower tax bracket now than when s/he retires. However, a worker in that situation probably has no idea what they are giving up. In any case it is not the tax deduction on one’s contribution that is important but the tax deferral on growth. If you assume 7% compounded growth, the contribution will double in 10 years, and by the time the worker retires in 40 years, will have gone up by a factor of 16, all growth tax-deferred.

Irukandji's avatar

@crazyguy It’s the first line of the first table. 401(k) plans are a type of defined contribution plan, and 60% of American workers have access to some type of defined contribution plan. But while 401(k) plans are the overwhelming majority of defined contribution plans, not all defined contribution plans are 401(k). I looked up various analyses of how many people have access to other types of defined contribution plans who do not also have access to a 401(k) plan, and different sources said anything from 1 to 5 percentage points. Since none of those analyses were definitive, I went with the number most charitable to your position (59%).

As for the tax deferral on growth, nothing stops the young worker from using those savings in a way that lets them make larger contributions to their 401(k) at a later date. It’s a niche situation, but there are cases where it could work out for the best overall.

crazyguy's avatar

@Irukandji If a worker does not take a contribution in a year, that tax savings is permanently forfeited. As is the potential growth on that contribution.

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