Who's pulling Wall Street strings?

Current market volatility during the Covid-19 crisis and race protests is something to be expected, even though it seems clear that some entities are doing everything in their power to pull up Wall Street.

Well, the stock market is eyeing the future, not the current situation, and the both aren’t pretty at all. So what’s going on? I personally see Trump asking his Secretary of the Treasury, Steven Mnuchin, to find creative and effective ways to influence the stock market, which for Trump is the yardstick by which he thinks the nation measures economic success and is key to his re-election.

Mnuchin knows most of the ropes and quite a few important folks on Wall Street. After all, he used to be an investment banker and hedge fund manager. Among other jobs, he was on the Sears-Kmart board of directors before it went bankrupt and was eventually sued of “asset stripping”. During the financial crisis he also was embroiled in more lawsuits when he sold OneWest Bank to the CIT group. So the man isn’t what you’d call a saint.

Now, Manipulating stock prices takes place more often than people might think. Achieving it in a perfectly legal way is not necessarily difficult, depending on how much trading power an entity has. Many ways exist to drive market prices in a certain directions, but that only work if one or several large investors work on stocks they own and begin selling them off.

As this happens, prices will naturally take a plunge and panic other investors that might begin to unload the stocks as well creating a vicious circle. The opposite holds also true if large institutional investors can be convinced to purchase a basket of stocks for a variety of good reasons, especially if they come from financial leaders that know one thing or two about influencing market trends.

When other investors notice that the stock prices begin to rise again, they also want to buy up the stock so they can ride the uptrend and make a profit, creating a short lived, virtuous circle. Could Mnunchin and his Wall Street friends try to prop up the market in that manner? Why not? At least this is how I explain the lack of logic behind the current stop market rise after reaching a record low on March 23, 2020.

We’ll know more in July when second quarter results bring some grim reality back to Trump and Wall Street...