Making the Dow Jones Great Again

It seems that the surprises of the 2016 election aren’t over yet. Tuesday was the second consecutive record-breaking day for all four major U.S. stock indexes. The Dow led the way, soaring 67.18 points, or 0.4 percent, to close at a never-before-seen high of 19,023.87.

Nobody expected it. While the market had been on an upswing for some time before the election, immediately prior to it was another story, as stocks fell for nine straight days in the two weeks before November 8. This was attributed by pundits to the supposed fear of a possible Trump presidency.

Now all can see that the sky did not fall after all following Hillary Clinton’s tearful concession speech, and investor confidence, the great engine of business, actually made a dramatic comeback.

Once the initial shock of the Trump victory began to wear off, the market drop of the day after ran its course. People began to take a more sober look at the results, and realized that a Trump presidency wouldn’t be such a bad idea for the economy after all.

Not only did the Democrats lose the White House, they also failed to displace the Republicans in Congress. With party support in both houses, the president-elect will have a fair chance of seeing some of his market-friendly polices passed into law.

A stimulus package to rebuild the national infrastructure is high on the agenda, as reflected in surges in stocks such as Caterpillar and U.S. Steel. There is also an anticipated rollback of Obamacare and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Pharmaceutical companies are rubbing hands with glee over that.

We are particularly hopeful about a campaign proposal to raise the Earned Income Tax Credit (EITC), which would allow families to deduct child-care expenses on their income taxes. Because it works through the tax code rather than burdening employers, it was touted as the Trumpian “pro-work alternative” to the Clintonian advocacy of raising the minimum wage.

While the EITC has less populist appeal than the more simplistic approach of a wage raise, comparative analysis of the two has shown that the former would actually be more beneficial for working people. A 2015 University of New Hampshire survey asked 166 labor economists for their opinion on the best policies to reduce poverty. More than 70 percent identified the EITC as a very efficient means; only 5 percent said the same thing about a $15 minimum wage.

In the meantime, euphoria is the reigning emotion.

“Whatever else the future holds, Trump has already made the U.S. stock market great again,” Don Luskin, chief investment officer at financial firm TrendMacro, exclaimed to USA Today.

But euphoria, as always, is a premature emotion. Or, to put it another way: “Happy times are here again!” Not so fast.

“There’s always the danger that you jump to conclusions way too fast because a lot of these expected benefits will take time to pan out,” said Jimmy Chang, chief investment strategist at Rockefeller & Co.

Behind every silver lining is another cloud. Among the clouds: an acceleration in the recent selloff in bonds, a stronger dollar dragging down corporate earnings, new protectionist policies that could disrupt international trade.

This is a period of transition for everyone, not only for the president-elect and his team. Republicans, Democrats, economists and the rest of us have all got to calm down a bit. We have to scale down expectations, or anxieties, as the case may be.

We have to realize that the ups and downs of the Dow Jones did not, and do not, necessarily point to the direction the economy will take in the coming months. As much as they try to focus on the bottom line, analysts and investors are notoriously sensitive, even oversensitive, to political events.

Finally, we certainly welcome the impressive performance of the Dow and other indexes this week. But we have to bear in mind that there are a great many people in this country — including many in our own community — who are struggling to pay for basic expenses, and their plight must not be obscured by the record highs.

It is not enough for Wall Street to prosper; for it to be truly a national comeback the average American needs to share in it as well.