Hey Millennials, here’s how being too conservative with your money could cost you in the future. USA TODAY
The political problems in Trumpland are now causing problems for the stock market on Wall Street.
Political jitters finally caught up with the Dow, which tumbled 274 points Thursday, its worst one-day drop in three months. The selloff was fueled by mounting concerns about President Trump’s ability to push through his economic agenda and fresh fears that his closest economic advisers at the White House will abandon him like the nation’s top business executives did this week.
The stock market has shown tremendous resilience in recent weeks. It first shrugged off the saber-rattling between the U.S. and North Korea. Then this week, the Dow Jones industrial average marched higher three days in a row despite the latest controversy swirling around Trump, who on Wednesday lost the backing of many of the nation’s most powerful CEOs after not forcefully enough denouncing the role of hate groups in the deadly weekend protest in Virginia.
The Trump controversy finally got the attention of investors Thursday when rumors of a pending departure of Trump’s economic adviser Gary Cohn — which the White House shot down — fanned fresh fears that Trump was being deserted by yet more influential people deemed critical to the success of his economic agenda.
The Dow fell 274.14 points, or 1.24%, to 21,750.73. It was the blue-chip stock gauge’s biggest one-day point and percentage decline since May 17, trimming its year-to-date gain to 10.1% and leaving it down 1.7% from its Aug. 7 record high of 22,118.42.
“The reason for the selloff seems to be the cumulative news over the last two days where it looks like the president is being deserted by the cream of the cream of the business establishment,” said Chris Rupkey, chief financial economist at MUFG. “The rumor of Gary Cohn leaving the administration (Thursday) shows you how worried the market is about the Trump presidency imploding.”
What Wall Street fears is that Trump’s troubles and lack of support from the business community and his own party could result in legislative gridlock that will snuff out his plans to inject life into the slow-growing economy.
“The market’s fear Trump’s increasing isolation and what that means for his ability to shepherd through his pro-growth policy initiatives,” says Michael Farr, president and CEO of Farr, Miller & Washington, a money-management firm based in Washington, D.C.
Adding to investors angst was Sen. Bob Corker, a Republican from Tennessee, slamming the president for his handling of the hate- and racially-inspired violence in Charlottesville, Va. “The chorus is growing louder” from within Trump’s own party, says Rupkey, further raising concerns about whether Trump can recover from the latest crisis.
But some market pros say the Dow’s steep decline was not all about Trump’s woes. The market, which is overvalued by many valuation metrics and, thus vulnerable, was also hurt by a spate of weak earnings reports and forward guidance from companies like L Brands, the parent company of Victoria’s Secret, tech titan Cisco Systems and Wal-Mart Stores, the nation’s biggest retailer.
A terrorist attack in Barcelona, where a van rammed into pedestrians, killing at least 13, also weighed on investors’ mood.
“That made the market susceptible to profit-taking,” said Quincy Krosby, chief market strategist at Prudential Financial.
The good news, says Jim Paulsen, chief investment strategist at The Leuthold Group, is that the U.S. stock market is still being supported by key underpinnings, such as an improving U.S. economy, which should enable it to rebound from any declines and make new record highs this year.
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