Markets Are Telling Trump to Listen to Experts

(Bloomberg Businessweek) -- Throughout the coronavirus crisis, Donald Trump has wavered about the quickest way to return the U.S. economy to health. Sometimes he imparts the message urged by his public health team to stay home and take precautions. Other times, he touts unproven miracle drugs like hydroxychloroquine or muses about reopening businesses prematurely. Day to day, hour to hour, often within the same briefing and sometimes within the same sentence, Trump pinballs between these two positions, desperate to rekindle the strong economy and booming stock market that were supposed to be his ticket to reelection.

Whether or not Trump heeds it, this week’s strong market rally, which briefly pushed the S&P 500 Index into technical bull territory, provides evidence that many investors believe strict public health measures—not wishful thinking—are the fastest path to recovery.

On Monday morning, Italy and Spain reported the fewest coronavirus deaths in more than two weeks, while New York saw daily fatalities decline for the first time, indications that stay-at-home measures and economic lockdowns were finally producing results. “It is hopeful,” New York Gov. Andrew M. Cuomo said of the easing rate of infections and deaths, “but it is also inconclusive, and it still depends on what we do.”

Markets rallied on the news. The S&P 500 and Dow each closed up more than 7 percent on Monday.

In recent weeks, preoccupied by staggering unemployment numbers and forecasts of a sharp economic contraction, Trump has repeatedly indicated he might abandon public health policies and encourage businesses to reopen, even if doing so worsens the rate of infection and death. “We can’t have the cure be worse than the problem,” he told reporters on March 24th. “We have to open our country because that causes problems that, in my opinion, could be far bigger problems.”

But it’s the opposite approach that’s driving this week’s turnaround. Investors are responding to the apparent success of the public health lockdown Trump has been bridling against. “What the takeaway should be is that we need to continue this policy, perhaps for even longer than we originally thought,” Peter Cecchini, chief market strategist at Cantor Fitzgerald, told Bloomberg News. “I want to be as optimistic as the next guy about [reopening the economy], but I think we need to be realistic.”

A new working paper by MIT economist Jeffrey Harris buttresses that assessment by identifying three factors that appear to have contributed to the improving numbers: government-mandated distancing measures; clear, accurate and timely information about the virus; and the rising number of people who personally know someone who has contracted it. “Put bluntly,” Harris concludes, “what flattened the curve was no more than the naked truth.”

Harris isn’t the sort of expert Trump tends to listen to. Over the weekend, reports emerged that he’s become infatuated with controversial celebrity surgeon Dr. Mehmet Oz, who’s appeared dozens of times on Fox News recently extolling the unproven benefits of the anti-malarial drug hydroxychloroquine to treat coronavirus. At his Sunday briefing, Trump called it “a game changer.” He’s still looking for a quick fix to the crisis.

It’s doubtful one will materialize. But the flattening curve that’s rallying markets suggests the current strictures may allow the worst outcomes to be avoided. Rightly or wrongly, Trump has always viewed the stock market as a referendum on his own performance. It’s rising because the shutdown he grudgingly endorsed is at last showing results. Maintaining it may not produce the quick fix Trump desires, but it’s the fastest way to bring the economy out of hibernation.

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