Stocks, Profits and American Values

Terry H. Schwadron

Aug. 21, 2017

Donald Trump has been quick to claim credit for his six-month presidency by citing rocketing performance of the stock market, which already had been rising during the end of the Obama days.

But the President was pretty silent when the markets slipped by 250 points last week, a substantial enough slide for notice. According to Business Insider magazine, the markets tumbled late last week after rumors swirled that Gary Cohn, President Trump’s top economic adviser and formerly Goldman Sach’s number two who happens to be Jewish, might resign in protest over the President’s weird remarks equating neo-Nazis and white supremacists with counter protests. Cohn reportedly was furious to have to stand next to the President as he recited his off-the-cuff remarks last week.

Meanwhile, people like me are surprised that Cohn can continue working without saying anything about the fundamental American values question: Hate, violence, acts and speech demeaning blacks and Jews have no place in our society.

The issue, of course, is that Donald Trump, the would-be populist President who is the only human alive to be around to help alienated white voters left behind by a decade or two of economic trend, needs Cohn to be able to persuade all parties of the arguments to pass tax “reform,” lowered corporate tax rates, an infrastructure partnership program with private business, a radically reduced federal budget, a raised debt ceiling, and Dodd-Frank banking changes.

The would-be populist apparently needs the soul of Wall Street to deliver his campaign promises. Only ill-defined economic goals are coming out of the same presidential mouth that thinks there are fine people among the country’s white nationalists.

At the same time that Cohn seems to be staying in, Stephen K. Bannon, who is credited for work at Breitbart News that gave hope to the alt-right and goals of America First, is out. And Bannon is said to be gunning at Cohn personally, and White House foes generally, as he returns to Breitbart this week.

When Bannon’s ouster was made public, traders at the New York Stock Exchange “literally cheered,” according to CNBC. That may have been a reflection of Bannon’s desires for American isolationism, not a popular Wall Street theme. For sure, Bannon and Cohn have been enemies within the White House.

So, in the face of all of this, the Dow average and the S&P 500 slumped. Gold, a traditional safe haven trade, climbed as investors pulled into safety assets.

I’m looking to how the market opens this morning to see whether any of these oddball events will continue to roil the markets. So far, at least, the White House has denied that Cohn is leaving or that any talk about support for white supremacist thinking is aimed at Wall Street. The President has moved on, as usual, now to prepare for an announcement of policy and tactics in Afghanistan.

Still, no one would accuse Wall Street of a surfeit patience. The jitteriness among business leaders reflects fears that a Cohn departure would stifle some of the administration’s business-friendly ideas, according to Business Insider.

“I don’t want to be an alarmist, but there is a lot of faith that he is going to help carry through the tax reform that people are looking for,” Yale School of Management’s Jeffrey Sonnenfeld told CNBC.”I think if he steps away, it would crash markets.”

It’s hardly an endorsement for Making America Great again.

Since last November, stocks rallied as investors considered the possibility of deregulation, fiscal stimulus, and tax cuts that would come with a Trump victory and a Republican majority. Russia scandals, ethics questions, questionable personnel conflicts aside, the economic push has continued to historically high levels.

Still the failures of legislation, the continuing Russia investigations and now apparent endorsement of racist language has created market uneasiness.

“The biggest disappointment of 2017 has been Washington DC. Hopes for transformative fiscal action have been dashed by the inability to find legislative consensus, despite single-party control of both Congress and the presidency,” a Morgan Stanley team led by strategist Andrew Sheets wrote in April, even before failure of the health care bill.

Several months later, the general business support for Mr. Trump appears to have somewhat cooled. In the last week, the decision by Merck CEO Kenneth Frazier to resign from the president’s manufacturing council started an exodus of business partners and led to the eventual disbanding of two panels mostly made up of business leaders.

Against this backdrop, early Cohn exit could be enough to break the market’s confidence in the Trump administration’s ability to pass pro-business agenda, Jaret Seiberg, an analyst at Cowen Washington Research Group, told CNBC.

That the President needs a Goldman Sachs guy to be credible is not good; that the Goldman Sachs guy keeps his own mouth shut as talk of neo-Nazis comes out of the President’s mouth is worse; that Cohn’s political enemy is stronger out of the White House than in is just bizarre; and that fact that profits outscore American values is just sad. On top of all of this, the actual White House policies under discussion won’t help most of us in any case.

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