Barclays Plc is challenging U.S. President Donald Trump’s claim of credit for record stock market levels.
The U.S. equity market’s “Trump rally” actually has its roots in the period before the 2016 presidential election and is due to economic factors, such as oil’s recovery and looser policy in China, according to Barclays.
The S&P 500 Index rose to multiple records in January, following a 19 percent jump last year.
“Buoyant capital markets primarily reflect economic forces already in motion rather than any change of political personnel,” William Hobbs, head of investment strategy at Barclays’ wealth management unit in London, said in a blog post.
“The ongoing rally in global stocks rests primarily on the improving economic backdrop, rather than the so-called ‘Trump Rally.’”
Had Trump been the primary reason for last year’s stock-market gains, equity returns would have been driven by valuation expansion, since the Senate didn’t pass the tax overhaul until December, Barclays said.
Instead, the bank’s calculations show that valuation growth accounted for less than a third of the MSCI USA’s total returns, which were dominated by rising corporate earnings.
While Trump’s tax overhaul delivers a deep, lasting cut for corporations and temporary benefits for individuals and is expected to stimulate economic growth and earnings, Barclays warns that stimulus isn’t needed during economic recovery.
While the step “may make for good politics with midterm primaries approaching, it is unlikely to make for good economics long term.”
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