- The stock market has gone through a wild few days, with the Dow Jones Industrial Average dropping more than 1,100 points on Monday.
- The White House is pointing to the “fundamentals of the economy” as a reason not to worry about the downturn.
- It’s a fair argument, but the phrase has a checkered history in politics.
As the stock market spirals downward in what economists have characterised as the first major correction of Donald Trump’s presidency, the White House is leaning on one phrase to try to soothe concerns: The “fundamentals” of the economy are “strong.”
As stocks around the world tanked, Vice President Mike Pence told reporters early Tuesday the sharp decline was “simply the ebb and flow of our stock markets.” He suggested the underlying economic data for the US was fine.
“The most important numbers to focus on are the fundamentals,” Pence said. “And the fundamentals of this economy continue to be very strong.”
Treasury Secretary Steven Mnuchin also attempted to assuage fears before his testimony to the House Financial Services Committee on Tuesday.
“The fundamental economics are very strong,” Mnuchin told CNBC. “The economy is doing very well. Tax reform is clearly helping earnings a lot.”
The Dow Jones Industrial Average was slightly positive in early trading Tuesday. But the bounce back followed a record point drop for the index and a significant sell-off in global markets.
Pence’s sentiment was similar to a statement on Monday from the White House press secretary, Sarah Huckabee Sanders, that said, “The President’s focus is on our long-term economic fundamentals, which remain exceptionally strong.”
We also heard the phrase from Raj Shah, a deputy press secretary, who said the fundamentals were “headed in the right direction – particularly for the middle class.”
Though corporate earnings are still strong, wages are rising, and job growth is steady, some potential trouble spots still have the market spooked.
It appears inflation could return to the economy after a long dormancy, presenting a longer-term fear of Federal Reserve interest-rate hikes and possible a slowdown in economic growth.
While none of this presents a short-term danger, there remains a concern that some of Trump’s policies, such as increasing trade protectionism, could exacerbate the issue.
Calling “the fundamentals” of the economy “strong” has a checkered history in recent politics. Most famously, John McCain, the 2008 Republican presidential nominee, used the phrase on September 15, 2008, the same day the Wall Street giant Lehman Brothers filed for bankruptcy. Many political analysts consider it a turning point in the 2008 presidential campaign, which Barack Obama ultimately won.
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