Donald Trump has benefited from a stable economy in the US – but who knows how long that will last

There is a vulnerability to asset prices. Maybe they will continue to climb, but they might fall sharply ahead of the forthcoming economic slowdown

The S&P 500 hits a new all-time high. Good for Donald Trump, or maybe better for Elizabeth Warren?

To unpack that thought, a solid stock market is of course a sign of confidence in the US economy, and a remarkable one in the face of growing concerns about a slowdown in 2020. But it is also a result of the loose monetary policies around the world. The European Central Bank announces that it will print some more money. So where does that money go? Some of it goes into US equities, because US growth is faster than German, French or Italian growth. The Chinese authorities try and pump up the economy. Where does some of that money go? Yup, the US again – it doesn’t go into Hong Kong, that’s for sure.

So insofar as strong share prices reflect a strong, or at least a relatively strong economy compared with the rest of the developed world, that must help an incumbent president. There is a question as to how long the boom continues, for it is pumped up by a huge fiscal deficit of more than 4 per cent of GDP, as well as what, by historical standards, are very low interest rates. The hope for the president is that reasonable growth and strong equity prices continue for another year. But a booming US stock market, indeed booming asset prices in general, make the rich even richer. The festering sense that it is deeply unfair for people to become wealthy by sitting on their assets rather than earning their money like everybody else is the key driver pushing the Democratic presidential candidates to the left, hence the calls for a wealth tax. Leading that charge is Elizabeth Warren.