Will the stock market crash if Trump is elected President?
To start, let me point out that the stock market is near its all-time high. The S&P 500 index is significantly higher than where it was at its previous 2007 peak (before the crash in 2008). Stock markets crash when they are near all-time highs, so even without the Trump factor, the market is in danger of crashing.
Then there is the observation that when the stock market does crash, it tends to happen in the fall. There’s no way of knowing if this is mere coincidence of if there is something to it. But the historical accident of previous crashes happening in the fall could cause the cycle to repeat itself again because the stock market is based as much on psychology as it is on the logic of financial valuations. If traders think that other traders will sell because it’s the fall and they think the market is risky in the fall, then they will want to sell before the other traders, leading to a cascade effect of selling.
And finally we get to Trump. The mainstream media has been pushing the meme that if Trump is elected president, it will be a “disaster” for the economy. For example, using the word “disaster” in the headline, Business Insider reports:
Willem Buiter, the chief economist at Citi, said in a note to clients on Thursday that a Trump win would weigh heavily on financial markets, and that his policies would deter global trade and economic growth.
The second problem for Trump’s Frankenstein economics is that his seemingly contradictory proposals would be a disaster if they were enacted. Moody’s economic forecasting conducted a nonpartisan analysis of Trump’s proposals and concluded that they would lead to a loss of 3.5 million jobs. And they would cost the U.S. economy trillions of dollars of lost growth.
If Trump wins, some people actually believe the disaster predictions and will sell before everything goes to hell. And then there are those traders who may not believe the anti-Trump propaganda, but they believe that other people believe it and will want to sell first, because no one wants to be the last man holding the bag (that’s for Joe Sixpack holding mutual funds in his 401K).
Also, I think that some people will want the stock market to crash if Trump wins, in order to punish the stupid voters who elected him and to be able to say “see, we smart liberals told you so.”
Right now, everyone believes that Trump has no chance of winning, because he’s just too low class too win, and polling throughout the summer has shown a huge lead for Hillary. But if polls start showing that Trump is in the lead, this could trigger the stock market crash before the election even happens.
Or it might not happen that way at all. Predicting the stock market is beyond the power of most mortals. No one should buy or sell any securities based on this blog post which has been written strictly for entertainment purposes.