The three peaks in the history of the US stock market all collapsed under the rule of Republican presidents. In 1928, Hoover came to power and ushered in the Great Depression. In 1973, Nixon witnessed a 50% plunge. In 2008, Bush's policies fueled the financial crisis.
Now that Trump has returned to the White House, taking over the strongest bull market and highest valuation in nearly 150 years, he has introduced radical policies such as deregulation, tax cuts, cryptocurrency reserves, and tariffs.
Historical data shows that economic growth during Republican presidents’ terms is 1.2% lower on average, and the number of recessions is three times that of Democrats. Will this be another moment of collapse? Will it be imminent or will it be delayed?
Use data to tell you the most realistic market forecast! !
Trump has returned to the White House, bringing with him the most powerful bull market in recent years. This guy is not idle and has begun to promote a bunch of new measures. Will Trump's policies push the stock market to another high peak?
Think about the 2008 crisis. Bush's policies were the trigger. Bush was busy pushing houses to the people at the time, continuing Clinton's deregulation policy, and cutting taxes in 2001 and 2003 in an attempt to pull up the 2001 low tide.
As a result, these three moves together blew up the real estate market into a big bubble, which finally burst with a snap and the financial crisis came! !
Trump is now also calling for deregulation and tax cuts, which is a bit similar to Bush's approach. These measures can get the economy going, yes, but there is another side to it!!
Assets like the stock market and the housing market are easily overhyped, and in the end, it hurts a lot!! The current stock market valuation is frighteningly high, which has not been seen in 150 years. If the conditions are met and the bubble is inflated to the top and then bursts, it will be exciting!
But don't blame the president entirely, this is a complicated matter, investors' psychology and luck are all involved, and the president is sometimes the scapegoat.
Since the 19th century, Republican presidents have experienced 18 recessions, while Democrats have experienced only 6. Since 1949, the economy under Republican rule has been an average of 1.2% slower, job growth has been 1.4% lower, and the unemployment rate has been 0.6% higher!
The same is true for the stock market. A few months after the election, the S&P 500 returned 40% more to the Democrats. The blue line on the graph rose rapidly, while the red line withered. History shows that the economy and the market are worse under the Republicans, which is completely contrary to the impression that they are better at managing the economy. . .
The natural cycle of the economy is called the business cycle. Its ups and downs depend mainly on how the Federal Reserve plays the game. When the economy is slow, they loosen the monetary policy; when it is fast, they tighten the monetary policy. It has nothing to do with who is in charge of the White House!
The Federal Reserve is very independent. In theory, no party can control it. If you look at the records since 1949, Republican presidents always come to power at the top of the cycle. Hoover, Nixon, and Bush are all like this. They are destined to suffer.
The Democrats often come to power when the economy is at its lowest point or just recovering, and then the economy naturally rises and they just take advantage of it!
When Trump came to power, the data was close to the end of the cycle. Look at the number of initial unemployment benefits in the United States, which is as low as the floor. Isn't this the taste of the period before a recession?
Unlike when we just climbed out of recession, unemployment was high and there was room for improvement. We don’t have that room now. In addition, the yield curve has inverted over the past year, which is an old signal before a recession.
The recession may be pushed to 2026, but it is still during his term. It is not because of the bad policies, but because the cycle does not wait for anyone! !
The main thing is that Trump’s policies may hinder the team’s progress, which is tariffs, which is a bit like what happened during Hoover’s time!!
When Hoover came to power, the stock market was booming, corporate profits were booming, and assets were rising, but ordinary people were suffering, and the wealth gap was frighteningly large, which is quite similar to today.
The stock market hit a new high, valuations were high and profits were fat, but ordinary people were frowning. Hoover wanted to fix the disparity and created the Smoot-Hawley tariff, with the tax rate soaring to 20%. As a result, a global trade war broke out and the economy collapsed. . .
There are countless studies that say these tariffs were the driving force behind the Great Depression!!
Tariffs are low now, but some people estimate that if Trump starts another trade war, the tariff rate may reach 17.7%, which will depress corporate profits and the stock market will fall accordingly! !
During the Great Depression, profits dropped from 10-12% to 0%, and the stock market fell by 90%. Tariffs were not the only reason. Debt, bank failures, and deflation all contributed to the decline, but high tariffs were the key driver!!
Today's profits are frighteningly high again. A big trade war may reverse this trend.
High profits exacerbate inequality, shareholders earn more but workers don’t get a share, Trump’s tariffs may be able to reverse this situation, which may be a good thing for society!!
But asset prices will be hurt. Tariffs won’t explode immediately. Research shows that there will be Trump’s first round of trade war in the 1930s and 1940s, and the impact will lag by one year.
If he starts the war quickly, ruthlessly and accurately, it might hurt in 2026, so there is a high probability that a recession will come in 2026!! What will happen to Bitcoin?
Data source: Bravos Research
