At 10:51 a.m. on Wednesday, President Trump fired up Twitter to denounce Nordstrom. The upscale department store, beloved by coastal elites and red-state suburbanites for its customer service and classy fashion, had recently dropped Ivanka Trump’s line of clothing and accessories from its shelves. The president was angry.
Nordstrom didn’t react, other than to note, as it had last week, that it had dropped Ivanka’s brand because of its wan sales performance. And neither did its stock. After dipping slightly, Nordstrom shares quickly recovered their equilibrium. In this instance, the Trump effect was a blip.
What’s going on here? Set aside for a moment the sheer raging lunacy of the idea that a sitting president, the guy who controls nuclear codes and commands a vast army, is using his office to attack a American department store. Markets tend to normalize to new environments. A few months ago, it was shocking, unprecedented, inconceivable that a president would bash individual publicly held companies and publicly strike deals with others. And so company-specific Trump tweets tended to inspire an immediate reaction. Trump has a huge following, which he had managed to convert into real power. So if he’s calling out a company as a bad actor, you hit the sell button first and asked questions later. Lockheed Martin’s stock, for example, dived in December when president-elect Trump bashed the high costs of the F-35.
But the more normal these attacks become—there he tweets again!—the easier it has become for investors to ignore or look through them, even as some smarties have devised algorithms to trade on the news of Trump’s company-specific tweets. The market has learned to ignore Trump’s tweets in part because the histrionics haven’t been followed by meaningful action. As Trump has realized, you can’t run the entire government by executive order. Making moves to punish or aid businesses—like reforming health care, or having Medicare negotiate drug prices, or cutting corporate taxes, or building a wall—requires legislation, assent by the courts, and bureaucracies to execute the policy. Given that many of Trump’s threats won’t materialize, investors have concluded that they shouldn’t sell on his bluster.
There’s also another dynamic at work that helps explain the Nordstrom nonreaction. Markets are smart. In sifting through Trump’s tweets, investors are quickly distinguishing between the companies that Trump, his administration, and his followers can actually help or hurt directly and those they can’t.
Into the first category fall companies for whom the federal government supplies a large amount of revenues via contracts or appropriation: defense contracts like Lockheed Martin, drug companies, hospitals. They are exposed directly to the wrath of Trump. A subset of this category includes companies for whom the link is less direct—a change in regulations or policy could either hurt or harm their bottom line over time. This subset includes for-profit colleges and prisons, student lenders, Fannie Mae and Freddie Mac, and Wall Street firms who might benefit from decreased regulation. They’re less levered to Trump tweets but can still be affected.
But some stocks are likely impervious to Trump’s rage. These include consumer-facing companies that don’t depend on government contracts for revenues, or that don’t need favorable government policy to buttress their business model. Instead, they rely on their brand, products, customer service, and position in the marketplace. And it takes a lot more than a tweet from a historically unpopular president to get consumers to sour on brands they like.
Companies are even less vulnerable if the type of people who are most likely to respond to Trump call for a boycott or vindictive shunning aren’t likely to be their patrons in the first place. This describes Nordstrom to a tee. It’s a higher-end department store. It doesn’t have government contracts. Spend some time on Nordstrom’s store locator map, and you’ll see that, electorally speaking, Nordstrom is as un-Trumpian a company as they come. The chain is based in Seattle and its physical outlets are clustered on the seaboards, plus the urban and suburban havens of red states. There are 80 Nordstrom stores or outlets in California alone, and none in many of the lightly populated states that Trump won: Kentucky, Arkansas, Mississippi, North and South Dakota. If you were to construct a Venn diagram of Nordstrom shoppers and the subjects of the book Hillbilly Elegy, the two circles wouldn’t touch. Many of Trump’s supporters are already boycotting Nordstrom—they just don’t know it. And others, like upper-income suburban whites, may ultimately not much care.
In fact, in some instances, a hostile Trump tweet can actually be a positive to investors. In recent weeks, we’ve seen a phenomenon whereby people quickly rally to the side of those who have been attacked by Trump or who take actions that can be perceived as being part of the resistance. Nordstrom is already well-liked by its core customers, some percentage of whom may take the tweet as an excuse to support and patronize the store. And that would be good for business. So it’s not all that surprising that, by late afternoon, Nordstrom’s stock had risen nearly 4 percent.
In January, busloads of well-off groups of progressives traveled to the National Mall in Washington to rally against Trump. This weekend, we may just see them taking their activism to their closest Nordstrom.