From February 27 2024:
Trump is not just foretelling a market meltdown — something he, wrongly,
forecast in 2020. The former president is predicting the mother of all market crashes if he isn’t victorious.
“If we lose, you’re gonna have a crash like you wouldn’t believe,” Trump said at a campaign rally on Friday. He went on to say a loss for him would spark “the largest stock market crash we’ve ever had.”
Asked about Trump’s market warning, David Kelly, chief global strategist at JPMorgan Asset Management said: “I think I heard that three years ago.”
Indeed, between August and October of 2020 alone,
Trump sent six tweets saying the market would “crash” if Joe Biden were elected president. He made a similar warning in an October 2020
debate with Biden.
That forecast proved comically false.
The Dow spiked nearly 12% in November 2020, its best month since January 1987. And under Biden, the benchmark S&P 500 has climbed 34% to all-time highs.
Sam Stovall, chief investment strategist at CFRA Research, downplayed the doomsaying from Trump as just a way for the GOP front-runner to get attention and perhaps motivate voters.
“Fear sells,” he said.
Trump, who loved to tout the stock market when he was in the White House, has recently tried to take credit for the market performance under Biden.
“The only thing that’s doing well is the stock market. And it’s doing well because the polls are all showing that we’re winning by a lot,” Trump said on Friday, echoing a claim he’s made in recent weeks.
Market strategists largely dismissed that argument.
“It’s just ludicrous,” said Hogan. “Whenever a president tries to attach any effect over the market, it’s just a waste of time. It gets even more laughable for a former president to do that.”
The S&P 500 has surged 24% since the recent low in late October. The Nasdaq has rallied 27%. The
Dow crossed the 38,000 level for the first time last month — and then
cruised above 39,000 just a month later.
But this rally has little to anything to do with the 2024 race for the White House, according to market veterans.
Instead, they say the market milestones are being fueled by the strengthening economy, growing corporate profits, the fact that the Federal Reserve has stopped hiking interest rates.
“It’s all about better economics,” said Kelly, the JPMorgan executive whose division manages $2.9 trillion. “The US economy has proven it can grow, avoid recession and maintain an unemployment rate at or below 4% – even as inflation comes down.”
The stock market has generated higher annual returns when Democrats are in power. Since 1945, the S&P 500 has posted an average gain of 11.5% during years when there is a Democrat in the White House, compared with 7.1% under Republicans, according to CFRA Research.
Analysts are split today on whether a Trump 2.0 agenda would be a positive or a negative for the market and the economy.
A Trump win could fuel hopes that the Trump tax cuts will be extended. But that could also amplify concerns about America’s massive budget deficits and mountain of debt.
Investors would not be excited about the return of Tariff Man, as Trump dubbed himself during his trade war with China. Earlier this year, Trump vowed to i
mpose a tariff upward of 60% on all Chinese imports if he’s reelected.
There are also concerns about the chaos of a Trump presidency — and what it would mean for the Federal Reserve.
Trump recently said he would not reappoint Jerome Powell — his handpicked chairman of the Federal Reserve — and even
accused him of considering rate cuts to help Democrats in November.
Powell, a Republican, was
reappointed by Biden in 2021 and his term
does not expire until May 2026.
“I think Trump would try to force out Jerome Powell. And booting Powell would not be well received by the markets,” said Greg Valliere, chief US policy strategist at AGF Investments.
For now, Valliere thinks markets are agnostic about Trump, especially because the election is a lifetime away for notoriously short-term focused investors. But that could change.
“There is a wariness in the markets of the instability that might accompany Trump’s reelection,” said Valliere.
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