Dow Jones Crashes, Trump and Gundlach Blame Democrats

  • US stock markets continued their losing streak on Wednesday. The Dow Jones Industrial Average Index lost 0.46%. While markets were trading sharply higher in early trade, they eventually pared the gains and closed with losses.
  • Among the broader market indices, the S&P 500 and the Russell 2000 also closed with losses. However, the Nasdaq Composite closed marginally in the green. President Trump and Jeffrey Gundlach put some of the blame on Democrats.

Dow Jones Index crashes

The Dow Jones Index fell 0.46% on Wednesday. The index has closed with losses in eight out of the last nine trading sessions. Overall, the Dow Jones has lost 8.8% from its closing high of 29,551 on February 12. When markets fall 10%, they’re said to be in a “correction.” Notably, on Tuesday and Wednesday, stock markets traded with substantial gains in early trade. However, as the day progressed, they pared the gains and closed with losses. Coronavirus threats have spooked investors. More countries have reported coronavirus cases. The Dow Jones futures are pointing to a weak opening today as well.

Trump and Gundlach blame the Democrats

Meanwhile, as the Dow Jones crashed over the last few trading sessions, DoubleLine Capital CEO Jeffrey Gundlach and President Trump blamed Democrats. In an email to CNBC, Gundlach said, “The market goes down in a knee jerk way on the Bernie rise, but the market going down makes Bernie’s polls go up on his rejection of a market based economy. Which makes the market go down another leg.”

What contributed to the Dow Jones crash?

President Trump held a press conference on Wednesday in a bid to calm nerves amid the Dow Jones crash. While he admitted that concerns about the coronavirus spreading have led to the sell-off, he also added a twist. President Trump put some of the blame on Democrats. He responded to a question about whether financial markets are overreacting to the coronavirus threat given the 2,000 point crash in the Dow Jones this week. He said, “I think the financial markets are very upset when they look at the Democrat candidates standing on that stage making fools out of themselves.” He also said, “I think you can add quite a bit of sell-off to what they are saying.”

Trump’s obsession with stock markets

President Trump has been obsessed with stock market returns. He sees the returns as a reflection of his administration’s performance. President Trump promptly tweets when the Dow Jones Index scales a new milestone. Multiple times, he has said that stock markets would crash if he isn’t reelected. He made the remarks during his recent visit to India as well.

Dow Jones and S&P 500

President Trump has looked uncomfortable when stock markets have fallen sharply. In December 2018, when the Dow Jones crashed, the Trump administration sprung into action. Treasury Secretary Steven Mnuchin held a call with President Trump’s Working Group on Financial Markets, which is known as the “Plunge Protection Team.” Later, President Trump advised buying stocks. Notably, following his advice might have made you rich! While pundits predicted a stock market crash for 2019, the Dow Jones Index (NYSEARCA:DIA) and the S&P 500 (NYSEARCA:SPY) scaled new highs.

Should President Trump be micromanaging stock markets? In my view, government intervention should be limited to a systemic crisis like the 2008–2009 financial crisis. Stock markets should be left alone unless there’s a significant bubble or a massive crash than could threaten financial stability. Do the current stock markets conform to either of these scenarios? I don’t think so.