The market’s attention to U.S. President Donald Trump’s policy agenda has faded since September even as more traditional factors like macroeconomic data remain a driving force, Goldman Sachs Group Inc. economists Charles Himmelberg and James Weldon wrote in a note on Thursday.
Earlier in the year, 10-year Treasury yields “appeared to display a significant beta to presidential approval ratings,” they said, noting that the dollar and U.S. equities exposed to proposed corporate tax changes showed similar patterns. That relationship has faded in recent months, “consistent with a shift in market focus away from crude indicators (such as presidential approval).”
The divergence occurred in September amid improvements in the macroeconomic outlook, Trump’s agreement to work with Democrats and a turning point for the legislative calendar as fiscal deadlines cleared, among other things, according to the note.
That doesn’t mean markets have gotten any easier to predict. It brings to the forefront “a broader array of factors (such as congressional motives) that are more important to legislative success, but harder to quantify,” the economists said.
“President Trump’s contribution to the fiscal outlook has faded,” they observed. Presidential approval is simply “no longer in focus.”