Trump warns the market will crash if he loses. Investors just laugh

Analysis by Matt Egan, CNN

New York (CNN) — Former President Donald Trump is once again warning the stock market is doomed unless voters return him to the White House.

Trump is not just foretelling a market meltdown — something he, wrongly, forecast in 2020. The former president is predicting the mother of all market crashes if he isn’t victorious.

“If we lose, you’re gonna have a crash like you wouldn’t believe,” Trump said at a campaign rally on Friday. He went on to say a loss for him would spark “the largest stock market crash we’ve ever had.”

But there is no evidence to support that claim.

In fact, market veterans who CNN spoke to laughed off the former president’s warning of the biggest-ever market crash. They dismissed it as Trump just being Trump and argued the 2024 race for the White House has had little — if any — role in fueling the market boom.

“That’s the Trump bluster that I just don’t pay a lot of attention to,” said Brian Gardner, chief Washington policy strategist at Stifel. “There’s not going to be a huge selloff if Trump were to lose. Regardless of who wins, post-election you could see a rally — fueled by relief that it’s over.”

David Kelly, chief global strategist at JPMorgan Asset Management, said he doesn’t believe anybody who claims to be able to time the market — not even those who spend their entire careers trying to do just that.

“I would trust their opinion over that of any politician,” said Kelly. “I don’t believe they’re able to say what the market is going to do in the first week of November. And I don’t believe any politician can do that either.”

Asked about Trump’s market warning, Kelly said: “I think I heard that three years ago.”

Indeed, between August and October of 2020 alone, Trump sent six tweets saying the market would “crash” if Joe Biden were elected president. He made a similar warning in an October 2020 debate with Biden.

That forecast proved comically false.

The Dow spiked nearly 12% in November 2020, its best month since January 1987. And under Biden, the benchmark S&P 500 has climbed 34% to all-time highs.

“This is just an encore presentation of what he said last time,” said Art Hogan, chief market strategist at B. Riley Financial. “Oh, and by the way, we are significantly higher. We didn’t go through a massive selloff. We certainly didn’t go through a recession or depression.”

Sam Stovall, chief investment strategist at CFRA Research, downplayed the doomsaying from Trump as just a way for the GOP front-runner to get attention and perhaps motivate voters.

“Fear sells,” he said.

Trump claims credit for 2024 market rally

Trump, who loved to tout the stock market when he was in the White House, has recently tried to take credit for the market performance under Biden.

“The only thing that’s doing well is the stock market. And it’s doing well because the polls are all showing that we’re winning by a lot,” Trump said on Friday, echoing a claim he’s made in recent weeks.

Market strategists largely dismissed that argument.

“It’s just ludicrous,” said Hogan. “Whenever a president tries to attach any effect over the market, it’s just a waste of time. It gets even more laughable for a former president to do that.”

There’s no doubt markets have been on quite the roll in recent months.

The S&P 500 has surged 24% since the recent low in late October. The Nasdaq has rallied 27%. The Dow crossed the 38,000 level for the first time last month — and then cruised above 39,000 just a month later.

The real reason markets are on fire

But this rally has little to anything to do with the 2024 race for the White House, according to market veterans.

Instead, they say the market milestones are being fueled by the strengthening economy, growing corporate profits, the fact that the Federal Reserve has stopped hiking interest rates and euphoria over artificial intelligence.

“It’s all about better economics,” said Kelly, the JPMorgan executive whose division manages $2.9 trillion. “The US economy has proven it can grow, avoid recession and maintain an unemployment rate at or below 4% – even as inflation comes down.”

Kelly said investors are worried about fundamental things like valuations, corporate profits, inflation and rates.

“The evidence suggests the stock market is looking at other things other than who is president,” he said.

Gardner, the Stifel executive, said he does believe a possible Trump victory has played a supporting role in the market run.

“There is a strong opinion among investors – both institutional and retail – that Trump will win,” he said.

But even Gardner doesn’t think Trump is the primary factor fueling the rally.

“It’s a secondary or tertiary impact,” he said.

Markets do well under both parties

Biden campaign spokesperson James Singer told CNN it’s “no surprise Trump is jealous” of the Biden economy. He pointed to the nearly 15 million new jobs created since Biden took office, record highs in the stock market and low unemployment.

“Rooting against the US economy is rooting against the American people,” Singer said.

Even though many assume Republicans are better for the economy and markets, history shows the market can thrive under either party.

In fact, the stock market has generated higher annual returns when Democrats are in power. Since 1945, the S&P 500 has posted an average gain of 11.5% during years when there is a Democrat in the White House, compared with 7.1% under Republicans, according to CFRA Research.

Would Trump be a market positive?

It’s true that Trump’s surprise victory in November 2016 helped spark an impressive rally in the stock market as investors bet on deregulation, tax cuts and infrastructure.

However, analysts are split today on whether a Trump 2.0 agenda would be a positive or a negative for the market and the economy.

A Trump win could fuel hopes that the Trump tax cuts will be extended. But that could also amplify concerns about America’s massive budget deficits and mountain of debt.

Investors would not be excited about the return of Tariff Man, as Trump dubbed himself during his trade war with China. Earlier this year, Trump vowed to impose a tariff upward of 60% on all Chinese imports if he’s reelected.

There are also concerns about the chaos of a Trump presidency — and what it would mean for the Federal Reserve.

Trump recently said he would not reappoint Jerome Powell — his handpicked chairman of the Federal Reserve — and even accused him of considering rate cuts to help Democrats in November.

Powell, a Republican, was reappointed by Biden in 2021 and his term does not expire until May 2026.

“I think Trump would try to force out Jerome Powell. And booting Powell would not be well received by the markets,” said Greg Valliere, chief US policy strategist at AGF Investments.

For now, Valliere thinks markets are agnostic about Trump, especially because the election is a lifetime away for notoriously short-term focused investors. But that could change.

“There is a wariness in the markets of the instability that might accompany Trump’s reelection,” said Valliere.

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