(Yahoo) President Trump has been heralding the market’s recent highs as one of the key accomplishments of his presidency. But as we head into the 2020 election season, at least one strategist says Wall Street is bearing hallmarks of a time when a president was voted out of office because of the economy.
“It reminds me very much of what happened during George H.W. Bush's presidency,” Matt Maley, chief market strategist at Miller Tabak + Co., told Yahoo Finance’s “The First Trade.” “The stock market from election day until the end of his third year was up 52%. That's exactly what Donald Trump's was. And yet the next year was flat. I think we're going to see something similar to that this year.”
Of course, President George H.W. Bush dealt with a major recession, brought on by a huge spike in oil prices after Iraq invaded Kuwait in July of 1990. The Dow crashed more than 18% and unemployment shot up to 7.8%. It set the stage for a young upstart Gov. Bill Clinton to famously make the economy the center of his winning campaign for president, with the reminder that “It’s the economy, stupid.”
There’s no evidence of that kind of trauma hitting the market this time around. While oil prices are spiking, the U.S. is less reliant on foreign sources than it was in 1990. And the Fed remains dovish, with inflation not a huge issue in the economy right now.
Maley’s bigger fear is disappointing earnings, with big banks JPMorgan Chase and Citigroup set to kick off earnings season on Jan. 14.
“Right now we're seeing consensus near about 8% to 9% growth for the S&P 500 and earnings,” Maley told Alexis Christoforous and Brian Sozzi. “I think you'll need more than that, at least that much to get any further significant rally in the stock market.”
As for the tensions with Iran, Maley says they are a concern, but don’t expect a major decline in the markets because of that alone.
“We had a lot of uncertainty pushed to the side in December, and now we have a new uncertainty into the marketplace,” Maley said. But with the huge run-up to end the year, “pullback from here isn't a surprise. In fact, I think it'd be quite healthy.”
