Three Ways to Continue the Trump Economic Boom

Financial markets have seen enormous volatility in recent weeks, including a violent 799-point Dow Jones Industrial Average drop on Tuesday.  Perspective is important here.  Even with recent losses, the DJIA is still higher on the year and up a stunning 37 percent since Donald Trump’s election. 

I have long posited that a rising stock market, while helpful to wealth creation, should hardly be the sole, or even primary, barometer of economic success for our nation and for the Trump agenda.  In fact, the stock market thrived during the slow-growth Obama presidency, benefiting from artificially low interest rates and depressed wages for American workers that inflated corporate profit margins. 

In this era of the Trump economic boom, we see just the opposite results.  Wages surge and optimism explodes, particularly for consumers and small businesses.  Not only is growth accelerating because of tax and regulatory relief, but the Trump-boom prosperity is also broadening as blue-collar wage growth exceeds white-collar wage growth for the first time in almost a decade.  

Recent market convulsions largely emanate from worries that pro-growth reforms will now cease given Democratic control of the House of Representatives.  While the expansion-inducing options for the president are limited now, there are still three viable reforms that can help the Trump boom continue and even accelerate.

Lean on the Federal Reserve -- Short-term interest rates have risen steadily ever since Trump’s 2016 triumph, and for good reason – faster growth! Because of the Trump boom, the Fed can finally normalize policy after years of top-down central planning that failed to ignite Main Street growth. But the Fed can also get carried away, and recent longer-dated bond market moves suggest that America is still far from macro-inflationary worries, as evidenced by the historic recent meltdown in oil prices.  So, President Trump should use the bully pulpit to cajole the Fed to “slow its roll.”