Eran Peleg, Chief Investment Officer
The Odds Are Stacked Against a Trump Re-Election in 2020
I am not a political analyst. However, I am the student of economic history. And at least as far as economics go, the odds seem stacked against a Trump re-election in 2020.
How is that? The argument runs as follows:
- In recent US history, an economic recession typically occurs every 5-10 years. In the 50+ years observed (see table below), we never had more than 10 years passing between two subsequent recessions.
- It has now been nearly 8 years since the last recession ended in early 2009. On this basis, there is a good chance that a recession will occur sometime in the next 2-3 years.
- It is therefore likely that the 2020 election campaign will happen against a background of weak US economic conditions – and recent history shows (see table again) that such elections -- that coincide or come shortly after a recession -- always result in the incumbent political party losing the elections.
Source: Clarity Capital Research
Obviously, the best Trump could hope for is completely avoiding a recession during his 4-year term. It may be possible, but it would be an extraordinary outcome given the history of economic cycles. Alternatively, perhaps a second-best would have been to get the recession as early in his term as possible, so that as he approaches 2020, it would already have been long forgotten. However, economic indicators do not suggest that a US recession is just around the corner.
It is still far away. But in thinking about 2020, the economic cycle could provide excellent signals regarding the likelihood of political change. It's (always) the economy, stupid!
Thanks to Tsvi Mark for his research support.