• Stock markets are attempting recovery after the Fed's open-ended QE and trillions of stimulus.
  • President Trump was looking for quick fixes and strives to reopen the economy by Easter.
  • It could lead to a deeper crash and failure to recover.

"It is going to be just fine" – that was President Donald Trump's first tweet referring to coronavirus. Two months later, coronavirus has infected over 55,000 Americans, has taken the lives of over 800, and the World Health Organization said the epicenter of the pandemic might shift to the US. 

The mix of playing it down, blaming political rivals, claiming early victories, and looking for shortcuts has hobbled the US response. It may now have even greater detrimental effects – delaying defeating Covid-19. For investors, it may result in another substantial crash in stocks and a longer recovery.

Trump looks for easy wins

That was only one of the president's dismissals of the illness that has gripped the world and sent stocks collapsing as a deep recession is already in play. He later went on to say that coronavirus is just another hoax by the Democrats, claiming that "all is in good recovery," and "under control."

When Trump closed the US to entries from China, he thought it was over and was sure the issue is solved. His rare Oval Office address also consisted of a travel ban – this time to Europe – without offering fiscal stimulus that the economy already needed. 

When he finally took things more seriously in mid-March by declaring a national emergency, he mistakenly said that several medications had been approved by the Food and Drugs Administration – only to be corrected later on. The president seemed to rush to declare a cure was available and find a shortcut.

Later on, local and state authorities began imposing lockdowns as coronavirus continued spreading. Mass layoffs were underway, and the administration's solution seemed to be asking states to tone down their reports about new claims – as if to make the problem go away by not talking about it.

At the time of writing, the latest quick fix is saying he does not want the cure to be worse than the disease and wish to see churches fill up in Easter. The self-proclaimed "wartime president" seems unprepared for a long battle. 

Why this approach is terrible for the economy and stocks

Markets have seen days of optimism – including the biggest rally since 1933 on March 24. That was partly thanks to the president's optimism but also due to other policymakers. Republicans and Democrats agreed on a $2 trillion stimulus package to keep the economy afloat, and the Federal Reserve had previously unleashed its open-ended Quantitative Easing program.

Yet $2 trillion may be insufficient, and so will all the bond-buying in the world if Trump continues looking for shortcuts. 

The optimistic message from the Commander in Chief confuses the public, that is asked to adhere to instructions from governors. By thinking that coronavirus is not severe, people may flout the guidelines and continue spreading the virus – delaying real victory over the disease. 

If Trump strongarms governors to lift some of the restrictions ahead of time, the number of infections could rise again. 

For markets, it is also a false signal that things are improving. And what happens if the president is wrong? It would be more than a delay in beating coronavirus and recovering, but also risks a loss of confidence. Investors would be cautious when reacting to genuine signs of improvement – from falling numbers of new deaths to the removal of lockdowns.

Early on, analysts spoke about a "V-shaped" recovery – a sudden shock due to the shuttering of the economy, followed by a swift recovery. A dent to sentiment may cause the economy to have an L-shape the same shock paralysis but with a long stall afterward. 

The bottom in equities could still be far. Another massive sell-off could be seen. Moreover, the recovery may be a prolonged one – no V, no U, and not even W. 

A secondary effect may also come from Trump's lower chances of being reelected, pushing Wall Street further down in fear of Democrat-led regulation.


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD rises above 0.9700 amid persistent dollar weakness

EUR/USD rises above 0.9700 amid persistent dollar weakness

EUR/USD has gathered bullish momentum and advanced to a fresh daily high above 0.9700 in the American session on Wednesday. The renewed selling pressure surrounding the greenback amid improving market mood seems to be fueling the pair's rebound.


GBP/USD extends recovery beyond 1.0850 in volatile session

GBP/USD extends recovery beyond 1.0850 in volatile session

Following an initial spike to 1.0850 on BoE's intervention in gilt markets, GBP/USD lost nearly 300 pips. With the dollar losing its strength after Wall Street's opening bell, however, the pair reaches fresh daily highs above the level. 


Gold: Sharp bounce falling short of indicating a trend change

Gold: Sharp bounce falling short of indicating a trend change

XAUUSD bounced from a fresh two-year low of $1,614.81 a troy ounce as dip buyers appeared on the dollar’s extreme overbought conditions. The bright metal peaked at $1,661.57, its highest for the week, holding above the $1,650 mid-US afternoon.

Gold News

Cardano price ignored the Vasil hard fork, but here is a promising bullish pattern

Cardano price ignored the Vasil hard fork, but here is a promising bullish pattern

ADA has a lot to prove to investors amid questions over frequent declines despite increased development activities. The smart contracts token is trading slightly below its price level before the Vasil hard fork.

Read more

Invesco Nasdaq Trust (QQQ) ETF hopes for pivot but faces Apple headwinds

Invesco Nasdaq Trust (QQQ) ETF hopes for pivot but faces Apple headwinds

Stocks remain challenged this morning by competing news as overall volatility levels remain close to recent highs. A brief attempt at a rally on Tuesday failed miserably, and now the market opens negatively after having attempted to move higher during the premarket.

Read more