Trump Predicts Stock Market Crash in 2020 if He Loses, but History Says Otherwise

As a broad rule, large stock movements are most likely when the outcome of a presidential election is unexpected. Those movements are more likely to be positive when a Republican wins.

Republican candidates have promoted policies friendly to the country’s largest companies going back to the 1880s, which has helped the party’s favorability on the stock market, said Eric Zitzewitz, a professor of economics at Dartmouth College who has also written about the topic.

“But the biggest movement is when the election results are a surprise and when the two parties are different on economic policy,” he said.  

President Barack Obama’s 2008 election, near the beginning of the Great Recession, saw the most market movement, according to the analysis of S&P 500 returns. The S&P 500 fell 5.27 percent the day after Obama’s election.

That probably had more to do with the faltering economy and an already skittish market than a reflection of the market’s confidence in Obama, several economists said. After Obama, the next-largest drop in the S&P 500 (4.42 percent) came after the first election of President Franklin D. Roosevelt in 1932, three years into the Great Depression.

“The economy is very important for driving presidential elections, and the economy is also a very important driver for the stock market,” Snowberg said. “The fact that those things move together shouldn’t be surprising.”

The stock market actually tends to favor Democrats throughout their entire presidency, Zitzewitz said. This is mostly due to Obama and Roosevelt, however, who experienced a major market crash before their terms began and benefited from the market’s rebound.

During the period between Election Day and a president’s inauguration, the stock market leads toward Republicans, according to a 2014 Princeton economics paper. The S&P 500 has ticked up 0.15 percent on average between Democrat-to-Republican transitions, but declined an average of 1.38 percent during Republican-to-Democrat transitions.

However, just because markets have reacted a certain way before doesn’t mean that’s how they will react in 2020, several economists said.  

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