Continuing The Trump Rally
June 14, 2017
There is no question: President Donald Trump has been great for U.S. markets.
Since he took office, the Nasdaq composite index has experienced an historic streak of growth, swelling from 5555.33 points on Inauguration Day to a year to date high of 6321.76. The index has dipped in the last few days, but it is still charting above 6,000 points – an all-time high – and has been since April 25.
The S&P 500, the Dow Jones Industrial, and others have seen similar trends. The market phenomenon has been dubbed the “Trump Rally,” and I expect it to continue.
Success on the Nasdaq is specifically important, because the Nasdaq composite is one of our best measures for investments in innovation, since it tracks nearly 3,000 mostly technology-focused firms including our nation’s five largest tech companies – Amazon (AMZN), Apple (AAPL), Facebook (FB), Alphabet (GOOG, GOOGL), and Microsoft (MSFT).
I spoke with Nasdaq’s Senior Vice President and Chief Marketing Officer Jeremy Skule during a Facebook Live stream Tuesday about how the President’s agenda is going to help innovators and businesses like the ones that list on the Nasdaq lead the United States into a new era of prosperity.
It’s not surprising that these leading companies – and the people who invest in them – are optimistic about the economy. Entrepreneurs and investors are not fazed by made-up scandals or liberal hysteria directed at the President. They recognize that, as I wrote in my new book Understanding Trump that was released Tuesday, President Trump is:
An entrepreneur, not an academic. To him, knowledge is a tool used to accomplish a goal – it’s not valuable if it’s not useful.
A builder, not a financier. Financiers sit in offices and theorize whether projects will be successful. When you build a building, it must actually stand up. Success is the only option.
And a pragmatist, not an ideologue. President Trump is going to find solutions to problems based on what is successful, not what is politically popular.
He has practical, not theoretical, knowledge about business. He spent his entire career producing tangible products and services that people want to buy – from large, luxurious buildings and resorts to ties to bestselling books. He understands how the economy works, and now he is working to get the government out of its way. The CEOs and shareholders at our major companies see this and have begun to bet on America again.
Business leaders have also noticed that President Trump, in contrast to a typical politician, is actually accomplishing the goals on which he campaigned. As soon as he was inaugurated, he began dismantling destructive regulations levied against businesses and taxpayers by the Obama administration. The President accomplished this through executive actions and with the help of the Republican Congress using the Congressional Review Act – a law passed when I was Speaker that allows Congress to permanently overturn any regulation issued by federal agencies within 60 legislative days. President Trump has been using it to undo damage done in the last days of the Obama administration. In fact, President Trump has been repealing red tape at a rate that matches President Ronald Reagan’s effort in the 1980s.
At the same time, President Trump and the Congress are also working to finish the enormous task of repealing and replacing Obamacare, update our country’s infrastructure with $3 trillion worth of investment, and lower taxes.
Nasdaq President and CEO Adena Friedman was exactly right in her May 3, 2017 Wall Street Journal op-ed when she said that reducing corporate taxes would provide an immediate boost to the stock market. In fact, markets have risen largely because investors expect Trump and Congressional Republicans to do just that.
As I write in Understanding Trump, the United States has the highest corporate tax rate among developed countries. The U.S. business tax is 38.92 percent, according to the Tax Foundation, while the world average for 188 countries and tax jurisdictions is 22.5 percent. The Foundation reported that overall, only two other tax jurisdictions have higher corporate taxes than the United States – Puerto Rico and the United Arab Emirates. Think of how many economic opportunities our nation is missing out on simply because businesses are going to places where they are not taxed so heavily.
The tax on business in America must come down, but we shouldn’t stop there. The capital gains tax severely hampers market growth – and as I propose in my book, it should be eliminated completely.
In 1997, when we simply lowered the capital gains tax from 28 percent to 20 percent, we saw over 4 percent growth in our GDP, which led to 6.7 million new jobs and a $3,400 increase in median income over three years. Growth to the U.S. economy in business and investment from 1997 to 1999 was such that federal revenue collected under the reduced capital gains rate was $279 billion – well over the $195 billion the Joint Committee on Taxation had estimated we would collect in that period.
There is no doubt, when the market is strong, people are better off. Businesses grow, hire more people, increase wages, and reinvest in America. Eliminating the capital gains tax would jumpstart a new era of prosperity in our country.
Congress and the White House should also take note of Nasdaq’s blueprint and work to modernize the structure of our financial markets – as well as the regulatory framework that surrounds them – to account for new technologies that allow investors to trade in real-time.
This concept is perfectly in-line with President Trump’s agenda. He has already started a search-and-destroy mission for regulations that make it more difficult to do business in the United States. As he said during the campaign, “Any regulation that is outdated, unnecessary, bad for workers, or contrary to the national interest will be scrapped.”
As President Trump and the Republican Congress continue to cut outdated regulations, modernize our markets, and lower job-killing taxes, the economy will continue to respond positively. And as much of the media continues to get lost in day-to-day drama and liberal daydreams, normal Americans will see economic growth, more jobs, and higher wages.
Normal Americans will see success. They will see America being made great again. That is what will truly carry the Trump Rally – in the market and in Washington – through 2018 and 2020.