SPX News by Allie Longford on 18:13 July 16, 2017 EST
The 45th US president arrived to the White House last year mastering different skills. Not only he was able to revolutionise the way a candidate would communicate to his potential voters with a fresh, straight to the point message but also used social media in an effective way only a handful of twenty something youtuber stars can rival.
Among his messages he clearly defined the current state of the US economy and in particular the effects the FED's policies have had on it and, as a perhaps unintended consequence, the stock markets.
In his own words, this is what he had to say ahead of the election:
"We're in a bubble right now. And 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. We are in a big, fat, ugly bubble. And we better be awfully careful."
The president has changed his tune on this matter since he won the race in November. A few days after the election he started to take credit for the commitment of some big companies not to take their factories abroad as previously planned thus "saving" american jobs.
He has carried on taking credit for any positive macro data released since while ignoring the weak. Not happy with that, he has been bragging for the past few weeks on the exuberance of the US stock market (around 20% up since his election) as one of his latest tweets above shows.
Trump surely knows that if the stock market was overvalued before the election and clearly identified the wrong doing of the FED the bubble is now even bigger and more vulnerable than before.
The S&P500 multiple is now at 26 meaning that, with any luck, an average share bought today will repay by itself in dividends in 26 years time. Whenever the index has reached this point it has come down crashing shortly after. This time won't be different as we continue immersed in the worst recovery after a crash in the last 100 years and governments around the world diving in an ocean of debt. Purchasing a slice of the market with such PER can only be justified because of the current positive trend but with such dismal yield it can not be seen as a good long term investment.
If Trump did not attribute himself the happy days Wall Street is enjoying lately he would be able in the future to refer to his statements from before the election to justify the inevitable upcoming tumble. However, he has now taken ownership of the bubble, he is making himself responsible for the fate of the market and when the almost 10 years old trend comes to its end he will be blamed for it in the same manner he takes credit for its bonanza now.
The only question is whether his ego is not allowing him to keep humble on this matter or whether he has already priced in the future consequences of his present bragging.