Tag Archive for: Trump Covid Diagnosis

When POTUS sneezes, nobody catches a cold…Trump’s win-win Covid diagnosis

Upon learning of President Trump’s Covid diagnosis on Friday afternoon, several friends asked me what would be the implication for the stock market? My response was that the illness was basically a non-issue.  In fact, this proved to be the case since the US stock markets finished down less than 1% by US close, about 0.8% higher than the S&P500 futures were indicating at the time of the announcement of Trump’s illness in Asia.  Collectively, the media went out of its way to dramatise the POTUS Covid diagnosis, without success, while the rest of us remain curious to see just how easily or otherwise Trump copes.  This latest twist in the POTUS Reality TV show that has been playing for nearly 4 years is so much more entertaining than what we would have had under Clinton MkII !

I firmly believe that someone with economic power would materially influence the asset markets should they fall ill or in some way become unable to exercise that power.  The corollary to this belief is that if POTUS has no economic power then the market will be unaffected.  Indeed, that belief underscored my initial assessment that Trump’s diagnosis is a non-issue for markets.  This may be hard for many to accept but the fact is that there is nothing much you can do to influence the economy if you are POTUS let alone anybody else in the community.  [It has been speculated that Larry Fink, CEO of Blackrock, commands more economic influence than Trump by virtue of his firm’s 50% shareholding in just about every company on earth!]  One of the beauties of the market system of economic organisation is that no one person calls the shots, rather the price mechanism aggregates the views of every atomistic actor to resolve a complex system delivering scarce resources to the economic sectors that can use them most efficiently.  Donald Trump may want to favour US manufacturing over Chinese delivery of output but that is not going to happen while Chinese labour is 10% of that of a US workers, for instance.

The one area that Trump’s illness may affect markets is its effect on the probability that the Republican party will lose the Presidency and/or control of the Senate.  It is well documented that Republican administrations are favoured by the stock markets so anything that tips the balance in favour of the Democrats would be bad for stocks.  Again, despite the turgid attempts by the elitist media to show that Trump’s behaviour courted the illness for himself and others in the community, it strikes me that this is a Win-Win situation for Trump.  I say this because there are 2 clear scenarios for the course of his illness, either

(i)  Trump recovers without complications; or

(ii) Trump falls gravely ill in a life/death scenario ultimately surviving or passing on as the case may be.

Scenario (i) would seem to vindicate his public stance to date that the Covid 19 virus is not as bad as its made out to be.  In this scenario POTUS turns out to be right and he wins votes for his good judgment.

Scenario (ii) commands public sympathy for the President and this means votes for him personally if he survives or his Vice-President if he doesn’t.

In both scenarios Trump wins votes.  Add to this the strong possibility that Trump will not be able to show up for the final Presidential debate, thereby avoiding self-harm, and it would seem that Trump will benefit from all this.

I stand by my prediction that Trump will win a second term.