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Trump’s Wary, Experts Warn of US Stock Market Crash

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May. 14 2020, Published 11:54 a.m. ET

  • President Trump frequently tweets about the stock markets. While US equity markets were quite resilient in the first three years of his presidency, they crashed this year.
  • As more experts warn about an impending crash, President Trump warned the individuals who have been expressing negative views on markets.
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President Trump and the market crash

President Trump used to frequently tweet about the market performance before US stock markets crashed in March. At one point, the Dow Jones Index (NYSEARCA:DIA) erased all of the returns under his presidency, which left him with little to tweet about. Many times, President Trump has warned that financial markets would crash if he gets impeached or isn’t reelected.

COVID-19 and the US stock market

US stock markets have shown a lot of resilience despite the COVID-19 pandemic. However, most experts have warned about a looming crash. Among leading brokerages, Goldman Sachs sees the S&P 500 falling to 2,400. Citi also has a bearish view on US equity markets. Many other brokerages have expressed concerns about the sharp rally in stock prices despite COVID-19’s economic pain.

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Trump’s tweet

In a tweet on Wednesday, President Trump lashed out against individuals who have expressed negative views on the equity markets. He tweeted, “When the so-called ‘rich guys’ speak negatively about the market, you must always remember that some are betting big against it, and make a lot of money if it goes down.” He also tweeted, “Then they go positive, get big publicity, and make it going up. They get you both ways. Barely legal.”

Fund managers on US stock markets

A large number of fund managers have a bearish view of US stock markets. For instance, Paul Tudor Jones and Jeffrey Gundlach expect markets to fall to their March lows. Double bottoms aren’t uncommon. We saw something similar in the 2008-2009 sell-off. Legendary value investor Warren Buffett hasn’t shared his views on a possible crash. However, the fact that Berkshire Hathaway increased its cash position in the first quarter and Buffett couldn’t identify opportunities despite the crash in US equity markets says it all.

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David Tepper on valuation

Recently, David Tepper and Stanley Druckenmiller expressed their concerns about valuations and the risk-reward scenario. Tepper advised caution in March amid the crash in US stock markets.

Trump’s 2020 reelection and US stock market crash

President Trump made a strong economy and booming US stock markets the key hallmarks of his 2020 election campaign. Amid the COVID-19 pandemic, the two themes have lost relevance. A US stock market crash could be the last thing President Trump would want as the 2020 election approaches.

There’s a clear disconnect between the economic realities and markets. Read US Stock Markets: What Are Bears Up Against? to learn more.

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