President Trump, of course, has made a habit of taking credit for the growing economy and stock market returns. “The reason our stock market is so successful is because of me,” the president said aboard Air Force One last week. “I’ve always been great with money, I’ve always been great with jobs, that’s what I do.”
Whether he deserves credit is, being charitable to him, up for debate. But what’s absolutely true is that if the global economy — and stock market — is a confidence game, confidence is clearly winning.
Mark Cuban, whose disdain for President Trump is so acute that he is considering running for president himself in 2020 as a Republican because it “means you get to go head-on with Trump right in the primaries — and so there’s nothing I’d have more fun doing.” Still, though, he said he believes the economy is in good enough shape that when it comes to investing in the stock market, “I just, you know, I just let it ride.”
Mr. Cuban, owner of the Dallas Mavericks, said he keeps a small amount of cash on hand as a precaution. “I keep a little bit, you know, as a hedge. I call it my ‘Trump hedge’ because you just never know. Now 280 characters can change the market in a heartbeat,” he said, not-so-jokingly alluding to the new character limit on Twitter, Mr. Trump’s communication tool of choice.
Measuring confidence, is of course, a subjective matter. There are dozens of surveys of chief executives and others asking them how “confident” they feel. Earlier this year, The Conference Board reported that chief executives’ confidence had reached 2008 pre-recession highs in the first quarter, though more recent surveys have showed a slight waning.
Still, merger activity, which this column has long argued is the purest measure of confidence — since most executives only do deals when they are genuinely confident in their own business and the economic environment — has reached a record high. It bolted in the past several months after what seemed like a surprisingly lackluster beginning of the year as executives appeared to be paralyzed by a sense of uncertainty, trying to gauge the first steps of a new president.
It appears that chief executives have found themselves certain that whatever “uncertainty” exists isn’t that uncertain after all.
Still, there are pockets of the economy that are causing anxiety. “The last two or three years have not been fun whatsoever,” Mickey Drexler, the chairman of J. Crew, said at the conference about the traditional retail business, which has been upended by Amazon and changes in consumer behavior. “It’s been miserable.” Those challenges are extending to mall owners and commercial real estate, too.
The question is whether all the enthusiastic talk from chief executives is reflective of a truly robust economy or whether we are missing something.
“There’s so many people talking about the record level of the stock market. The stock market is not a proxy for the economy of America,” said Howard Schultz, executive chairman of Starbucks. “I’m deeply concerned about the millions of Americans who are not participating in the economy.”
That may be worth remembering. If there is a lesson in having confidence, especially when everyone else is feeling that way, it is that it can quickly reverse.
“In the aftermath of corporate and public-sector disasters, it often emerges that participants fell prey to a collective form of willful blindness and overconfidence: mounting warning signals were systematically cast aside or met with denial, evidence avoided or selectively reinterpreted, dissenters shunned,” Roland Bénabou a professor at Princeton University wrote in a seminal work on confidence and groupthink. “Market bubbles and manias exhibit the same pattern of investors acting ’colorblind in a sea of red flags,’ followed by a crash.”