I have been reading Michael Wolff's new book, Fire and Fury: Inside the Trump White House, the No 1 best-seller across the world, which has worked the US president up into a paroxysm of rage and recrimination. He may hate it, but for the rest of us it is very, very scary.
We’ve all seen the headlines and maybe even read some of the extracts, suggesting that the leader of the free world is mentally unstable, has the attention span of a gnat, doesn’t read and doesn’t listen, and makes up policy on the hoof – which he then changes on a whim. The elaborately-painted picture – based, according to Wolff, on more than 200 interviews with White House staffers – is one of chaos, incompetence and of a country which is effectively rudderless, run by a man who is perilously close either to insanity or dementia, or maybe both.
Yet, economically and financially, the United States has had a great year – and it’s still going. The economy is growing at nearly 4 per cent, a figure it hasn’t reached since president Reagan’s day. The Dow Jones Industrial Average last week broke through the 25,000 mark, the Nasdaq Composite crossed the 7,000 mark last month, and share prices have been hitting new peaks almost weekly.
The latest jobs figures, published last Friday, marked the 87th straight month of employers adding to their payrolls, causing Mr Trump to tweet triumphantly: “This is all about the Make America Great Again agenda. Jobs, Jobs, Jobs. Six trillion dollars in value created!”
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And he has a point: unemployment is now down to 4.1 per cent, a 17-year low, with 2.1 million new jobs created in the past year (on top of 2.2 million in 2016, Barack Obama’s last year in power), and, after a long period of slipping sideways, wages were up 2.5 per cent since Mr Trump took over.
Good news, for once, is not hard to find. Across the globe, economies are responding to the US growth figures with China, Japan, India and the EU all recording strong growth. The worldwide stock market boom has continued into 2018 with the Fang stocks (Facebook, Amazon, Netflix and Google parent Alphabet) up by more than 5 per cent in the first week of January.
The US tech giants and their Chinese counterparts, Tencent and Alibaba, are still leading the way, with, according to analysts, scope for further fast earnings growth. Emerging market equities returned an extraordinary 37.75 per cent in dollar terms in 2017, handsomely topping even Wall Street.
How can this be? According to Wolff, Mr Trump doesn’t really have an economic policy other than to cut taxes, bring back jobs and make America great again – none of which is bad in itself. But there is no detail to it, no thought-out strategy based on economic think tanks and endless grinding of data – just broad, visceral brushstrokes painted from instinct without thinking through the consequences. Yet, does it matter?
Reading Wolff’s book, one wonders how the US economy functions at all under this White House, yet it does so remarkably effectively right now. The vast majority of American investors won’t read Wolff’s book, and don’t care anyway. They are much more interested in Mr Trump’s view (shared by his Republican cheerleaders) that a surge in business investment and wage rises, prompted by last year’s landmark tax reforms, will boost US GDP growth well above 4 per cent this year, and maybe even get to 5 per cent.
Stock market sages and commentators have been warning of a market blow-up since Mr Trump was elected president in November 2016. But it hasn’t happened yet. What’s more, most investors, including the big fund managers, don’t expect it any time soon. Just how positive they are is shown by surveys of sentiment which record the highest number of bulls, and the lowest number of bears, since the start of 1987.
"Shareholders are cheering on corporate capex, as they bet on a synchronised global economic boom," said The Wall Street Journal's columnist James Macintosh yesterday. "There are few fears of financial excess."
There are plenty of doubters of course, and forecasts of an imminent crash mount every time the Dow hits a new peak. Most analysts agree that stocks are not in a bubble. But, as Macintosh points out: “there are increasing signs of euphoria and it is plausible that a true blowout end to the bull market could be on the way soon.”
Yet even Macintosh reckons there is still a lot more money to be made by riding along with it. Anyone who jumped off the Trump locomotive this time last year, when the same gloomy predictions were being made by the same people, has missed out on a rise of more than 20 per cent.
The trick will be getting out; not necessarily at the top – that’s virtually impossible – but at a higher level than you got in. Investors in the Dot-com boom in 1996 had made huge gains by the summer of 2000, but were back to where they started in 2002. In equivalent terms, we may be somewhere around 1998-89. There’s still money to be made, it seems. But investors should be ready to jump.
Ivan Fallon is a former business editor of The Sunday Times