Will The Stock Market Crash in 2025 Under President Trump? Here's What The Numbers Say.

As President-elect Donald Trump prepares to take office, investors are wondering if the stock market will crash in 2025 under his leadership. While it's impossible to predict the future with certainty, historical data and current trends can provide valuable insights. Let's examine the numbers and explore what they might tell us about the potential for a stock market crash in 2025.



First, let's consider the historical correlation between Republican administrations and recessions. Since 1913, all 10 Republican presidents have experienced a recession during their tenure, compared to only four out of nine Democratic presidents. Additionally, from 1927 to March 2023, approximately two-thirds of the S&P 500's peak-to-trough drawdowns occurred during a recession. This suggests that a Republican presidency may increase the risk of a stock market crash or significant downturn. However, it is essential to note that the U.S. economy and stock market are not directly tied, and a recession does not guarantee a market crash.



Another concern based solely on history is the growing likelihood of significant downside for the stock market in the new year. The S&P 500's Shiller P/E ratio, which is based on average inflation-adjusted EPS from the previous 10 years, stood at 37.58 as of the closing bell on Jan. 8, more than double its average reading of 17.19 when back-tested to January 1871. In the past, premium valuations like these have not been tolerated over long periods, and the previous five instances were eventually followed by declines ranging from 20% to 89% in the Dow, S&P 500, and/or Nasdaq Composite.



To assess the potential for an economic downturn in 2025, investors should monitor several economic indicators, such as money supply, inflation, interest rates, GDP, unemployment rate, consumer confidence, business confidence, and trade deficit. A decline in money supply growth, persistently high or rising inflation rates, higher interest rates, a slowdown or contraction in GDP, an increase in the unemployment rate, a decrease in consumer and business confidence, and a widening trade deficit could all signal an economic slowdown or recession.



In conclusion, while the stock market may face challenges in 2025 under President Trump, it is essential to remain objective and consider multiple factors when evaluating the potential for a crash. Historical data and current trends suggest that investors should be cautious and monitor economic indicators closely. However, it is crucial to remember that no single indicator can definitively predict a recession, and a combination of factors should be considered when evaluating the economic outlook. As always, it is essential to maintain a balanced view and allow readers to form their own conclusions.