Congrats to Donald Trump on his re-election efforts. While everyone is cheering or jeering, we’ve been taking a trip down memory lane for clues as to what might come next for markets. Most stocks surged today but will it continue? Let’s take a look at how SPY performed under Trump’s first term.
There were three critical correction periods during Trump’s first term. Let’s take a look at them one by one. We overlay-ed high volume and noted sudden corrections on the chart above.
January 2018: -10.1%
The first SPY correction began with a peak of SPY at 286.58 on January 26, 2018 with a 10.1 percent drop to 257.63 on February 8, 2018. Notable event during this time frame was a government shutdown from January 20 thru January 22.
December 2018: -20.18%
The second SPY correction began with a peak on September 20, 2018 at 293.58 and a subsequent drop of 20.18 percent to 234.34 on December 24, 2018. Notable event during this time frame was a partial government shutdown from December thru January and was the longest shutdown in U.S. history.
March 2020: -34.1%
The third SPY correction began with a peak on February 19, 2020 of 338.34 and a subsequent drop to 222.95 on March 23, 2020. Notable event during this time frame was the COVID panic and subsequent national lock downs.
Toward the end of 2020 there was more stock market volatility for a variety of reasons including Donald Trump testing positive for COVID on October 2 and the cancellation of the second Presidential debate on October 15 due to COVID.
2025 and Beyond
Republicans will control the Senate and Presidency and possibly the House so it is doubtful government shutdown will occur at least during the first two years of Trump’s presidency until the mid-terms alter the political landscape.
Trump has been vocal about imposing tariffs on a variety of countries, tax policy that will balloon deficits and other things that may or may not come to pass.
A key interesting thing to note is U.S. Treasury yields spiking across the board on the announcement of his win. Is the bond market anticipating higher inflation? The Fed will announce their central bank policy tomorrow so stay tuned, stay profitable and stay solvent….