History tells a repeating tale of Republican presidents and market peaks…
Herbert Hoover in 1928 before the Great Depression.
Richard Nixon in 1973 before a 50% market crash.
George W. Bush presiding over the 2008 financial crisis.
Now Donald Trump returns after one of history’s strongest bull runs.
His new policies could mark a major turning point for financial markets.
In the leadup to 2008, Bush’s policies proved instrumental.
His administration aggressively promoted home ownership, continued Clinton-era financial deregulation, and implemented stimulative tax cuts in 2001 and 2003 after the 2001 slowdown.
This policy created the perfect conditions for the housing bubble that eventually triggered the financial crisis.
Today, Trump’s proposals for deregulation and tax cuts shares a similar theme.
While these pro-growth policies can benefit the economy, they risk fueling excessive market speculation.
With stock valuations reaching 150-year highs, we’re likely experiencing financial asset speculation already.
But bubbles can’t be blamed solely on administrations – they involve complex factors including investor psychology and market timing.
The numbers do tell an eye-opening story though…
18 recessions under Republican presidents since 1900, compared to just 6 under Democrats.
Even the performance gap of the economy is striking:
- Average real GDP growth: 1.2% lower under Republicans since 1949
- Job growth: 1.4% lower under Republican administrations
- Unemployment rate: 0.6% higher than with Democrats
The difference becomes even clearer when looking at market returns.
A chart comparing post-election S&P 500 performance shows nearly 40% higher returns under Democrat-led administrations than under Republican ones.
It’s ironic that markets and economic growth have historically performed better under Democrats, despite Republicans being viewed as more pro-business.
But, timing and luck likely play a bigger role in these outcomes than party policies alone.
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The Business Cycle Factor
The Fed, independent from the White House, drives the business cycle through monetary policy.
They adopt loose policy after slowdowns and restrictive policy to cool an overheating economy.
Looking back to 1949, Republican presidents often took office near cycle peaks – including Hoover, Nixon, and Bush.
Democrats typically entered during downturns or early recoveries, benefiting from natural economic expansion.
Today, Trump appears to have returned near a cycle end.
Initial jobless claims sit at very low levels – typically seen years before recession.
While we’ve extended our recession timeline to 2026, this would still occur under Trump’s watch.
The Tariff Risk
At Bravo’s Research, we stay apolitical and focus solely on objective, data-driven analysis.
That said, one Trump policy could indeed negatively impact the economy: Tariffs.
This looks similar to Herbert Hoover’s trade policies, which contributed to the onset of the Great Depression.
Hoover’s Smoot-Hawley tariffs pushed average tariff rates to 20%, triggering a devastating global trade war.
Today’s estimates suggest a second Trump trade war could drive tariffs to 17.7%.
During the Great Depression, these policies drove corporate profit margins from 10-12% to almost 0%, contributing to a 90% market decline.
While tariffs weren’t the only factor, bank failures and deflation played major roles, research confirms their significant negative impact.
With corporate profits at all-time highs today, a global trade war could reverse that trend.
Studies show tariff effects typically lag implementation by about a year.
So, an aggressive trade stance in 2025 could mean serious repercussions by 2026.
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