Trump administration falls back on one mantra to soothe worries over stock market meltdown
- The stock market has gone through a wild few days, with the Dow Jones industrial average dropping over 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 see as the first major correction of President Donald Trump's presidency, the White House is leaning on one phrase to try and 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 is 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 prior to his testimony to the House Financial Services committee on Tuesday.
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"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 from White House press secretary Sarah Huckabee Sanders on Monday.
"The President's focus is on our long-term economic fundamentals, which remain exceptionally strong," the statement said.
We also heard the phrase from Deputy Press Secretary Raj Shah, who said the fundamentals are "headed in the right direction — particularly for the middle class."
Indeed, corporate earnings are still strong, wages are rising, and job growth is steady — but there are some potential trouble spots that have the market spooked.
It appears that inflation could return to the economy after a long period of dormancy, which presents 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 concern that some of Trump's policies, such as increase trade protectionism, could exacerbate the issue.
Referring to "the fundamentals" of the economy as "strong" has an ignominious history in recent politics. Most famously, then-Republican nominee John McCain used the phrase on September 15, 2008, the same day as Wall Street giant Lehman Brothers filed for bankruptcy. Many political analysts consider it a turning point in the 2008 campaign, which McCain lost to President Barack Obama.
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