Trump’s stock market bubble is about to burst, David Stockman says

While President Trump is expected to tout a strong economy and tax cuts during his State of the Union address Tuesday, former Reagan Budget Director David Stockman tells FOX Business’ Neil Cavuto that the hype could backfire on President Trump.

“It’s a terrible mistake,” Stockman said on “Cavuto: Coast to Coast.” “This is the craziest financial bubble we’ve ever had. This is a suckers’ rally like never before.”

U.S. stocks traded lower for a second straight day on Tuesday ahead of President Trump’s inaugural State of the Union. The Dow Jones Industrial Average zoomed to 26,000 in January for the first time after completing the fastest rise on record between 1,000-point milestones. But in Stockman’s opinion, the gains are not sustainable.

“The economy is not taking off despite all the rhetoric from the Republicans in the White House,” he said and added that benefits from the tax bill would not boost the economy.

“All of the tax cuts are being borrowed, so it’s coming out of one side of the economy and going into another,” Stockman said.

When Cavuto asked whether he would prefer people borrowing to spend or borrowing to get tax cuts, Stockman replied; “They are both equally bad when you have a $21 trillion national debt.”

Even though the markets have been boosted by monetary policy, Stockman predicts a “market reset” once the Fed begins to unwind its balance sheet in October.

“That will totally undermine this phony, fantastic stock market bubble we have,” he said. “If Trump has any sense whatsoever he would get off this bragging thing and start beating up on Obama and on the Fed for delivering this mess to his doorstep.”