In the first week of February, a Credit Suisse analysis concluded that there was only one chart that mattered to markets: that of Trump's approval rating. As the bank's analyst Lori Calvasina wrote at the time, "US stocks have been trading closely with shifts in Trump’s favorability, as have 10 year Treasury yields...
...the Dollar, and crude oil."
She said that "within US equities, small caps, value, Financials, cyclicals, domestic revenue producers, and high tax payers have been particularly tied to shifts in Trump’s favorability, as has the performance of companies headquartered in states that voted for Trump."
We summarized Credit Suisse's observations by noting that "everything appears to be trading in lockstep with Trump's shifting approval rating" and concluded that "ironically, in a time when dispersion between various stocks has reportedly soared, correlation between virtually all asset classes has collapsed, and it is all linked to just one thing: Trump approval rating. For the sake of market bulls, let's hope that Trump's favorability rating never crashes, or otherwise the artificial, central-bank created construct known as "the market" will go down with it."
In retrospect, it appears that Credit Suisse's finding may have been premature, because according to the latest Gallup polling data, Trump's favorability, as judged by his job approval rating, has just tumbled to all time lows.
In a new poll from Gallup, President Trump's job approval rating dropped to 37%, while 58% of Americans disapprove of his performance so far as president.
The approval ratings, Trump's worst since taking office two months ago, came as FBI Director James Comey was being grilled by Congress over Russian involvement in the election, in which he denied the President claim that former President Barack Obama wiretapped Trump Tower during the election. Trump's approval rating hovered in the mid-to-low 40s in the weeks following the beginning of his presidency.
However, a troubling new development for Trump is that the latest poll numbers suggest rising dissatisfaction with Trump's approach following the controversial and at times chaotic rollout of the Republicans' plan to replace Obamacare. Gallup tracks daily the percentage of Americans who approve or disapprove of Trump's job performance. The daily results are based on telephone interviews with about 1,500 national adults and have a margin of error of 3 percentage points.
Or perhaps there is no correlation between Trump's job approval and his overall support, because a quick look at the "soft data" indicator, and its gaping divergence with actual "hard" economic data, confirms that the Trump-driven euphoria continues apace.
Unless of course, Trump's rating is a leading indicator to everything else. In which case, first it will be the soft data, and then the market itself, that will follow Trump's declining approval rating as the animal spirits fizzle.