I have frequently mentioned that the rise and fall of the stock market seems to have little to do with what is actually going on in the world and this week provided more evidence of this. On Tuesday, Trump in a tweet suddenly broke off talks with Democratic Party leaders who had been negotiating with treasury secretary Steven Mnuchin about another stimulus package. The stock market sank sharply on the news.
Then the next day, maybe in an effort to prop up the stock market which is after all the only economic indicator that he cares about, Trump tweeted would like to provide support in a piecemeal manner to selected industries like the airlines. In other words, he wanted Democrats to agree to just the things he wanted and abandon the things he disliked. This was a non-starter from the get-go and yet the stock market rallied on his words.
This baffles me. It should be clear by now that nothing Trump says should be taken seriously since he just lets loose with what he thinks at that moment even if it contradicts what he said just a moment ago. So why is the stock market responding mercurially to his tweet eruptions, since any stimulus spending requires detailed negotiations with many parties?