- - Thursday, January 4, 2018


A Dow 25,000 was the stuff of fevered fantasy, difficult for the most enthusiastic fan of Donald Trump to imagine on the eve of his inauguration. The Dow was bumping “only” 18,500 on Election Day 2016. But here we are, one year on, and a Dow 25,000 looks to be on the horizon.

In the 14 or so months since the Trump election, the stock market has soared by more than 35 percent. The economist Arthur Laffer estimates this bull market has increased America’s net wealth by $6 trillion — that’s trillion with a “t” — and maybe more.

The president’s critics can argue only that only the super rich benefit from a strong stock market, but that’s plain and demonstrably silly. The stock market is a measure, and not the only one, of the health of the economy, but more importantly, it measures the confidence, optimism and expectations of the future of the economy. If anyone doubts that a strong stock market helps the working stiff, he should consider the alternative. When the stock market crashed in 2008, more than 7 million Americans lost their jobs.

Companies losing money, or whose stock values are falling, don’t respond by raising pay or hiring more workers. A rising stock market doesn’t necessarily mean more jobs and higher wages at once, but a rising market is nearly always a harbinger of good times ahead.

It’s further nonsense to say that only the rich benefit from a rising stock market. Fifty-five million Americans have 401k plans. There are tens of millions more with IRAs and pensions. Where else is all that money invested? Junk bonds? A battered coffee can behind a brick in a basement wall? A rising stock market can be salvation for bankrupt state-government pension funds for retired teachers and municipal employees, even if few of them voted for Mr. Trump.

It’s a pity that liberals have argued for years that the stock market is too risky for investment, or that it’s a bad place to put Social Security dollars. How much richer the average American would be if 10 percent of his paycheck for the last decade had been parked in an index fund of American stocks.

Markets are always forward looking. The much-maligned Trump tax cut has clearly played a major role in the run up in stock shares. When the corporate tax rate falls from 35 percent to 21 percent, the bite of earnings taken by the government falls from one-third to one-fifth, which means the value of the after-tax earnings to the shareholders is considerably higher. Shareholders, who take the risk in investing in companies, should be getting most of the profits, not that well-meaning interloper in the gaudy striped pants.

Donald Trump, like him or not, has exposed his critics as wrong again. Most Trump tormentors were sure that he would cause the stock market to crash and burn. They warned Americans to sell, sell, sell if he pulled off a shocker and won the election. Anyone who listened to Paul Krugman or Larry Summers, liberal icons both, missed one of the great market run-ups in history.

Can the exuberance in the market continue? We’re sober enough to say we don’t know. Markets are always a roller-coaster ride, and it’s possible that the exuberance of Mr. Trump’s pro-business policies have run ahead of the market. The big issue for most Americans is whether the soaring stocks will lead to improved economic conditions in places like West Virginia, Ohio, Pennsylvania, Michigan, Wisconsin that never saw a recovery when Barack Obama was the man in charge.

The economy is growing now by 3 percent annually, and some economists, not afflicted with excessive exuberance, predict 4 percent growth next year. Whatever tonic Mr. Trump is selling, we need more of it.

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