KRUGMAN: People aren’t worried enough about Trump

Paul Krugman

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Paul Krugman
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Franck Robichon/Reuters

Paul Krugman, the Nobel winning economist and New York Times columnist, said Tuesday that he doesn’t think investors are worried enough about President Donald Trump.

During an interview on Bloomberg TV, Krugman admitted he was wrong when he predicted before the election that stocks would sell off if Trump were to win. But he also expressed surprise that investors weren’t now pricing in the possibility that Trump may mishandle a crisis.

“I’m a little surprised that the market doesn’t worry more about the downside of a totally catastrophic response if something bad happens,” Krugman said. “What if something bad happens and they handle everything the way they handled Puerto Rico?”

Krugman was referring to the administration’s response to Hurricane Maria slamming Puerto Rico. As of Tuesday, over 80% of the island still does not have power, Trump’s response to the crisis has received criticism.

“That ought to be some kind of weight on the market,” Krugman said. “But, we know markets tend to ignore those things until they do happen.”

Krugman said he isn’t sure how much of the recent record highs in the market are attributable to Trump, despite the president’s continued tweets about the market’s performance since his election win. For one thing, Krugman noted, markets around the world have increased as much – or more – than the US.

“We talk about ‘there’s a Trump bump,’ but there’s also a Merkel bump, a Macron bump, a May bump, an Abe bump, stock markets have been up all around the world,” Krugman said, referring to other world leaders. “So something else is going on. People like stocks … the market may not be telling us anything at all except that people are liking stocks.”

Krugman followed up his point in a tweet on Wednesday morning after Trump tweeted that the stock market increases since his election are “virtually unprecedented.” He pointed out that European stocks have gained as much as US stocks since Trump won.

Watch Krugman’s comments via Bloomberg: