This is more bullish than FOMC estimates, and benefits the results for Trump and the Republican party in this table, but only slightly.īy extension, I used -1% for my 2020 nominal GDP measurement, which also leans a bit towards a stronger economy than what the base case outcome is and thus gives an upward tilt to this term's numbers. Because we're rebounding from a pandemic with a substantial degree of uncertainty, I gave the economy the benefit of the doubt and used -2.5% as my 2020 real GDP estimate for the table. The Federal Reserve's FOMC currently estimates a -3.5% year-over-year change in Q4 2019 to Q4 2020 real GDP. So, it would be very unfair to President Trump and the Republican party in the chart to end the analysis on Q2 as the most recently reported official data, and therefore we need to estimate through the end of the current term. Q2 is widely recognized as the bottom of this recession, with a partial GDP rebound in Q3 (which is now over, but not yet reported), and an unclear outcome in Q4. In addition, the reported data currently go through Q2 2020, so there are still two reportable quarters left of President Trump's current term. So, that time shift affects about 0.8%-1.5% of a president's time in office, and is not very statistically significant. That affects approximately one-fourth of one quarter of a president's normal time in office, which can be 16 or 32 quarters depending on if they serve one term or two terms. Presidents take office on January 20th, while this analysis starts from January 1st of that period. This analysis rounds to the nearest quarter, since GDP is measured quarterly. ![]() ![]() GDP and federal debt growth by president, going back to the time of Jimmy Carter in the mid 1970's:ĭata Source: U.S. To start with, here is a chart of annualized U.S. But it'll dive into other branches of the government later in the analysis section. This analysis emphasizes presidential terms, because that's what I get the most questions about. A president that faces an opposing-party-controlled senate, for example, is a very different environment than if that president also has his party in charge of the senate. We tend to think of political history in terms of who was president, because we can put a face and a general political tone to that era, but congressional control plays a big part as well. However, underneath the surface, there are tons of other details. As a consequence, investors tend to assume that if a specific candidate, or more broadly a specific party wins, then various aspects of the economy will change suddenly. Human nature tends to place a lot of emphasis on specific events, rather than multi-year processes. So, let's take a look at it in data-driven terms, rather than partisan or narrative-driven terms. In recent interviews on various podcasts and media channels, I frequently get asked about how the upcoming presidential election affects my investment outlook. These election seasons tend to be good for media ratings and clicks, but to what extent do they matter for investors? Does accurately predicting the result of a presidential election generate outperformance? Can we say a lot about the direction of the economy depending on which political party is in charge? This article takes a look at those questions. During election season, a big portion of financial media news coverage shifts to presidential election outcomes.
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