Seemingly furious with the inability to tweet about the market's relentless meltup anymore after the biggest point drop in Dow Jones history, Trump decided to take a passive-aggressive approach this morning, and the president who less than two years ago called the market "one big, fat ugly bubble", tweeted the only thing he could in the current context, namely stating that the stock market is now dropping on good news, contrary to what it used to do in the past. Trump's conclusion: this is a "big mistake."
"In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!" Trump tweeted.
In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!— Donald J. Trump (@realDonaldTrump) February 7, 2018
While it was not explicit just which "good news" Trump had in mind, the problem is that "good news" at this juncture means higher rates, something the soaring 10Y at 2.80% confirms.
The irony here is two-fold.
First, Trump's fiscal stimulus plan will make the "good news" even better, further reducing slack, and forcing the Fed to remove even more accommodation by rising rates, which - of course - will send the market reeling, as the S&P is where it is not due to the state of the economy but thanks to $15+ trillion in central bank liquidity, something which Trump clearly was aware of in Sept. 2016 when he told Reuters that "The only thing that is strong is the artificial stock market." Oh, and he also told the WaPo in April 2016 that "I think we’re sitting on an economic bubble. A financial bubble."
He was right.
Second, and more important, is that Trump is already aware of all this: in September 2016 it was Trump himself who said that "The only thing that looks good is the stock market, but if you raise interest rates even a little bit, that’s going to come crashing down", once again adding for good measure that "we are in a big, fat, ugly bubble.”
And now that Trump finds himself trapped for having taking so much credit for the market's surge since the election, one wonders if Trump will then admit that the inverse is true: that stocks surge on bad news - i.e. more QE and lower rates as deflation returns... and just how will Trump reconcile that particular non-sequitur in the coming weeks.
The biggest problem for Trump, however, is that he now "owns" the market: which was great for Trump on the way up, but any crash and it will be Trump's fault, precisely as the real culprit behind the bubble, the Federal Reserve, wanted all along.