With yesterday's steep fall, Trump has now presided over the biggest stock market drop in US history, when measured by points in the Dow Jones industrial average. The free fall began in earnest on January 31 and then snowballed on Saturday and yesterday, for a combined loss of almost 2100 points, or 8 per cent of its value.
It is unclear if the past week will amount to a small correction or the beginning of a painful slide that many investors believed was overdue.
Trump's economic team is largely untested in periods of economic uncertainty. Many investors and lawmakers are watching the actions of Trump's newly sworn-in pick for Federal Reserve chairman, Jerome Powell, to see how quickly he is willing to raise interest rates in the face of rising inflation.
Treasury Secretary Steven Mnuchin briefed Trump on the market's fall yesterday during a trip to Ohio. Mnuchin is a close Trump adviser, but his views on how the Government should respond to market volatility are not well-known since he had little experience in Washington before joining the Administration.
The GOP's repeated swooning about the stock market performance in the past year has opened them up to criticism that they should take some responsibility for the past week's poor performance. Some of the investor anxiety is directly related to heightened fears about the growing budget deficit, which is widening under the new GOP tax law.
"Any time you claim credit for an increasing stock market you risk having to take the blame for one that decreases," said Republican Senator Ron Johnson. "Markets move in strange ways."
The beginning of the fall came on the same day as Trump's State of the Union speech, in which he boasted that "the stock market has smashed one record after another, gaining US$8 trillion ($11t) in value".
"The reason our stock market is so successful is because of me," Trump told reporters on Air Force One in November.
There are signs in recent weeks that Trump's approval rating had improved, particularly as he and other Republicans worked to tie decisions by a number of companies to offer bonuses and raise wages as a direct result of the tax cut plan. Sustained stock market losses, however, could undermine his effort to take credit for a growing economy ahead of November's congressional elections.
A January Washington Post-ABC News poll found 58 per cent rating the economy positively, up seven points in the past year and the highest level in 17 years. But fewer than 4 in 10 said Trump's Administration deserves significant credit for the economy's condition, compared with half who said the Obama Administration does.
"The perception of a growing and healthy economy is key to Trump's success as President," said Republican pollster Neil Newhouse. "The unnoticed number that people haven't paid attention to is the improving mood of the country, the right direction number. When that goes up, presidential approval goes up, and the condition of the economy is tied very strongly to that right direction number."
While most voters still disapprove of his presidency, the last time Trump hit 40 per cent approval before the turn of the year was May 2017.
- Washington Post, Telegraph Group Ltd
