Gallup’s Economic Confidence Index soared 13 points last week to turn positive for the first time since March 2015 in the wake of Donald Trump’s White House victory.
Gallup's Economic Confidence Index moved from a slightly negative evaluation (-10) to a slightly positive one (+3). The index had been consistently negative throughout the year leading up to the election.
The increase in economic confidence mostly stems from Republicans' more positive views after Trump won the election. Gallup has previously noted that Americans view the economy through a political lens. Republicans have had a dismal view of the economy -- especially of its future direction -- during Democratic President Barack Obama's two terms.
“After Trump won last week's election, Republicans and Republican-leaning independents now have a much more optimistic view of the U.S. economy's outlook than they did before the election. Just 16% of Republicans said the economy was getting better in the week before the election, while 81% said it was getting worse. Since the election, 49% say it is getting better and 44% worse,” Gallup reported.
“Conversely, Democrats and Democratic-leaning independents' confidence in the economy plummeted after the election. Before the election, 61% of Democrats said the economy was getting better and 35% worse. Now, Democrats are evenly divided, with 46% saying it is getting better and 47% saying it is getting worse.”
The index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse.
The index has registered positive only a handful of times over the nine years Gallup has tracked it daily -- the most recent being March 2015. For the week of Nov. 7-13, including two pre-election and five post-election days of interviewing, the index averaged 0.
Meanwhile, Wall Street investors were still cautious about how Trump's policies would compare to his campaign promises and were also keeping an eye on key appointments in his administration, Reuters reported.
"Last week's rally was basically a digestion of Trump's win and now that we're past the digestion phase, the market is taking a bit of a breather and is waiting to see what lies ahead under a Republican government," said Mark Watkins, regional investment manager at the Private Client Group at U.S. Bank in Park City, Utah.
For his part, Bridgewater Associates founder Ray Dalio is bullish on Trump's presidency.
Trump’s presidency will mark a move to the right akin to the Ronald Reagan era, he said. The new period will likely be characterized by decreasing globalization, increased U.S. growth as well as higher inflation, he wrote.
“We believe that we will have a profound president-led ideological shift that is of a magnitude, and in more ways than one, analogous to Ronald Reagan’s shift to the right,” Dalio wrote.
Meanwhile, Trump still has his critics.
Harvard historian and economist Niall Ferguson warned Trump’s campaign proposals would lead to a two-year boom in the U.S. economy followed by a rising fiscal imbalance and higher inflation and interest rates.
Trade renegotiations, possibly trade wars with countries such as China and Mexico, would hit the U.S. hard because it had a wide trade deficit, Ferguson said.
Trump's plan to cut taxes and invest in infrastructure and defense would boost GDP in the short-term, but it would significantly increase the U.S. budget deficit, leading to higher inflation and interest rates, Business Live explained.
“[Trump] will probably look pretty good next year and the year after that, but there is always a reckoning with these populist policies.”
(Newsmax wire services contributed to this report).
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