Tweets, Trade, and Presidential Approval Ratings

Sometimes we see a piece of data and think, “That’s really interesting but how do we connect it to something relevant for our readers to help them make money in the market?” We know early is the same thing as wrong, so we always backlog those tidbits and track them until they help us make a call. It can take weeks or even months…

And sometimes the connection happens in 24 hours, which is the case with today’s data point: President Trump’s Gallup survey approval rating. We’ve reviewed this occasionally, but it has just become much more important because of the global equity market’s reaction to his trade-related tweets on Sunday ahead of the upcoming visit by a senior Chinese trade delegation later in the week.

What we saw when we looked at this data on Saturday:

  • President Trump’s latest Gallup approval rating is 46%, a new record for his presidency.
  • The poll underpinning this data was taken from April 17 – 30, which encompassed the period of time after the release of the Mueller Report (April 18th).
  • Mr. Trump’s prior record high approval rating – 45% – was the week right after his inauguration. Since then it has bounced around from 35% to 44%.
  • At his current rating, President Trump has a higher approval percentage than President Obama at the same point in his first term (44%) and Ronald Reagan on the same chronology (42%). Both, of course, won reelection.
  • In their write-up of these latest results, Gallup cited the strong economy as a major factor in President Trump’s new high poll results. You can see the results here: https://news.gallup.com/poll/249344/trump-approval-remains-high.aspx
  • If you want to see Trump’s approval ratings to past presidents back to JFK, that data is here: https://news.gallup.com/poll/203198/presidential-approval-ratings-donald-trump.aspx
  • We use Gallup polls because they have a long-term track record and are therefore comparable to prior administrations. To see all recent polls, Nate Silver’s 538 website has a good breakdown: https://projects.fivethirtyeight.com/trump-approval-ratings/

The point here is that President Trump has some political capital jingling in his pocket and he clearly wants to spend some of it on the China trade issue.A good economy, strong stock market, and getting the release of the Mueller Report behind him have pushed his national popularity to its highest levels to-date. If some unpredictability on US-China trade negotiations creates a temporary blip in equity markets, so be it.

So where does that leave us with respect to teasing out what may come next on the trade issue and related equity market price action? Two points to consider:

  • We fully expect more theater on this topic this week and beyond, a sharp change from the “everything’s going to be all right” market read until last week. News after the close from Bob Lighthizer that the US will in fact institute fresh tariffs on Chinese imports come Friday is a good example of that.
  • At the same time we have zero doubt that the US and China will come to some sort of agreement this year, one good enough for the market to shrug off (if not embrace). Our only edge in making that call: the assumption that President Trump would like to be re-elected, and his stewardship of the economy is his strongest card with independent voters. Protracted stock market volatility because of trade negotiations (or any other issue) hurt his cause because of inevitable spill over effects into the real economy. Call it a “Trump Trade Put”…

Summing up: it’s very easy to make the issue of US-China trade very complex, but we’re taking a different tack. President Trump’s approval ratings just now give him some latitude for playing hardball, even if it comes at the expense of equity prices. This story is not over yet, but it should end well enough.

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