In poker, when a player has a habit that indicates that they are bluffing or another one that indicates they have a strong hand, it is called a tell. In criminal law when a criminal uses a certain method to commit the same crime over and over, they call it an M.O.—or modus operandi.
Right now, Wall Street seems to think that President Trump has a tell or an M.O. for his method of dealing with issues. After the announcement over the weekend that the U.S. and China had agreed to a tariff ceasefire, we got a glimpse of the President’s M.O. He announced via a tweet that the meeting with President Xi of China was an “extraordinary one.”
“My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!” President Trump, via Twitter
The initial reaction from the world’s investment markets was a positive one, but that positive enthusiasm didn’t last long. By the end of Monday’s trading action, the U.S. stock market had moved well off its highs and on Tuesday we saw a huge selloff with the S&P 500 losing 3.24%.
Throughout the day on Bloomberg, I heard a number of interviews with guests that talked about how President Trump has a habit of making these announcements without giving any details. Then when the details are released, the actual results aren’t nearly as great as we were led to believe.
Several announcements that were mentioned were the first meeting with President Xi at Mar A Lago, the summit with North Korea’s Kim Jong Un, and the meeting with Vladimir Putin in Paris this past July. In each case, there was a lot of pageantry and media attention, but in the end little changed after the meetings.
One other situation that was brought by several guests on Bloomberg was the recent trade agreement between the U.S., Canada and Mexico. While President Trump said it was a “model agreement that changes the trade landscape forever,” others have claimed that very little changed from the original NAFTA agreement.
Now, before you start saying this is just a bunch of liberals running down President Trump’s accomplishments, the people that were guests on Bloomberg were not politicians. These were business leaders and investments executives. I don’t think they really care whether the president is a Republican or a Democrat. First and foremost they care about their own businesses and the economy they are working in.
I have said since the trade war with China started that I applaud President Trump for tackling the issue. There were unfair practices between the two countries and it needed to be addressed. There were inequities between the two countries and it was not a balanced situation. Intellectual property laws were also a major concern and those needed to be addressed.
So far, there has been little accomplished to celebrate and I think that is why we are seeing the negative reaction by the stock market. The details have not been worked out and we are a long way from an agreement with China that is beneficial to Corporate America. The only part of the meeting that seems to be clear is that the two sides agreed to not assess any new tariffs for the next 90 days and that isn’t really something to celebrate.
In the business world people often talk about over promising and under delivering versus under promising and over delivering. Right now President Trump seems to be facing the former. Now investors have watched the scenario play out too many times and are questioning whether he can actually get a deal done. At this point, I would say that President Trump needs to change his M.O.
Instead of making big announcements and then providing little in the way of details, he might want to say little in the beginning and then make the grand announcement once the details are hashed out and an agreement is signed. This approach would restore investor confidence in his ability to deliver on the pro-business agenda he promised during the campaign.
When the new tax laws were signed one year ago, it gave investors and consumers alike a new level of confidence and it drove the market higher. Another accomplishment along those lines would go a long way in restoring the confidence.