Stocks and President Trump: Navigating the Market Rollercoaster
Is a Bear Market Likely Under President Donald Trump's Tenure? Statistically, the Situation Seems Apparent.
Navigating the stock market under President Trump hasn't been a walk in the park, and recent market fluctuations are a stark reminder that the market's unpredictable nature isn't reserved solely for rookies. Since February 2023, Wall Street has issued a chilling warning: stocks can indeed tumble - as the Dow Jones, S&P 500, and Nasdaq Composite have painfully demonstrated, plunging by 7.3%, 8.9%, and 12%, respectively, as of March 2023.
This sharp decline contrasts sharply with the gains seen during Trump's first term in office. As his term ended, the Dow Jones, S&P 500, and Nasdaq Composite had posted gains of 57%, 70%, and 142%, respectively.
With market volatility and investor emotions hitting a crescendo, one question lingers: is a bear market on the horizon under President Trump? With statistics and historical correlations in tow, the answer appears to be a resounding yes.
Recessions and Republican Presidents Go Together Like Peas and Carrots
Let's clear the air first: predicting the stock market's short-term moves with pinpoint accuracy is a pipe dream. If there was such a crystal ball, everyone would be using it. However, there are certain events and data points that have strongly correlated with meaningful stock market fluctuations throughout history. One such strong correlation? Recessions and Republican presidencies.
Since 1913, 19 different presidents have taken the reins - 9 Democrats and 10 Republicans. Interestingly, only 4 of the 9 Democrats didn't oversee a recession that started during their tenure - in contrast, all 10 Republican presidents, including the incumbent Donald Trump, have overseen a recession that began under their watch.
Fast forward to March 2023, and the #GDPNow model is forecasting a 2.4% contraction in Q1 2025's GDP - a figure that, if accurate, would mark the biggest GDP contraction for the U.S. economy, excluding the COVID-19 pandemic years, since early 2009.
bear markets: The silver lining (or so they say)
While a bear market might sound like a scary specter, it could also present a tantalizing opportunity for shrewd investors. History tells us that bear markets tend to be more common than many realize, with an S&P 500 bear market occurring, on average, every 3.53 years since September 1929. Although the stock market doesn't adhere to averages, it's worth noting that bear markets typically last for just 286 calendar days, or about 9.5 months, and that bull markets tend to stick around for considerably longer - often around 1,011 calendar days.
Furthermore, the longest bear market since the Great Depression lasted only 630 calendar days. If the current S&P 500 bull market were extended to the present, it would mark the 14th bull market to last longer than the longest bear market. Given time, the Dow Jones, S&P 500, and Nasdaq Composite are bound to reach new highs again.
The bottom line
Although there's no guarantee that a bear market will take shape under President Trump, historical data suggests that it's a possibility. As with any investment, it's crucial to have a long-term strategy and diversify your portfolio to minimize risk and optimize returns.
- Investors seemingly find themselves in a dilemma with President Trump's current term, as the market's unpredictable nature has come into sharp focus, with seemingly ominous signs of a potential bear market ahead.
- Money managers are closely monitoring the economy, paying particular attention to the average GDP contraction forecast for Q1 2025, which, if accurate, could bring about a bear market in line with past trends associated with Republican presidencies.
- With a h4p1rcpfin approach to investment, one can capitalize on the seemingly inevitable downturn by utilizing strategies such as dollar-cost averaging or purchasing undervalued stocks to prepare for the anticipated recovery.
- By staying informed about financial trends and relying on historical data, those invested in stocks and other assets can navigate the challenges associated with a bear market, ultimately working towards maintaining and growing their wealth during such seemingly daunting times.
