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How President Donald Trump and the Fed Affect the Economy

Personal Finance

How President Donald Trump and the Fed Affect the Economy

We’re not even 100 days into Donald Trump’s presidency yet, and two things are clear: Wall Street likes Trump, and the president likes Wall Street. Since the president took office, the market has enjoyed record-setting days, including the Dow breaking 20,000 points. This progress stalled slightly when the Fed announced they were raising interest rates, but seems to be heading upward again. This highlights the potentially complex relationship President Trump may have with the Fed in the future, but it could end up benefitting everyone.

History of Trump and the Fed

Throughout his campaign and even beforehand, Trump has been critical of America’s slow economic growth in recent years, stating that the Fed has been too slow to raise interest rates. He’s even gone so far as to say Fed Chairwoman Janet Yellen shouldn’t have her position anymore. However, since taking office, Trump has been quieter in his criticisms of the Fed, since they’ve already made one rate hike in 2017, and have projected several more.

The only catch is that with a rate hike comes an initial market slowdown while it destabilizes. The most recent slump didn’t last long, and the market rallied, which is a good indication of what could happen in the future.

How Trump is Affecting the Economy

Businesses are heartened by Trump’s talk about his plans for the economy. If his tax plan goes through, it will loosen regulations on corporations, which has made financial institutions, like Chase, look more attractive to investors. These corporations will then be able to use the money to hire more people, which leads to more money circulating in the economy.

He’s promised to bring back auto jobs, which would help that industry, and once Trump’s plans to build up the nation’s infrastructure are in place, those areas of the market will likely enjoy a boost as well. Basically, the markets very closely watch what Trump says, and react accordingly.

Recent reports have also pointed out that it’s the smaller investors who have been behind this market rally, not necessarily the big guys this time around. If people are looking to get into the stock market but have been gunshy after the recession, then this may be the time to get involved if Trump can make his plans a reality.

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