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Dow Will Crash 91% to Reagan-Era Levels if Trump Loses in 2020: Fed Pick

By CCN: The Dow and broader U.S. stock market rose Monday, bolstered by strong consumer spending data that pointed to a firm domestic recovery at the start of the year. Although markets are enjoying record highs for now, Donald Trump’s new Federal Reserve appointee thinks a 1929-style crash is likely if Democrats take control of the White House.

Dow Gives Back Gains; S&P 500, Nasdaq Hit All-Time Highs

All of Wall Street’s major indexes booked gains at the start of the week. The Dow Jones Industrial Average climbed by as much as 59 points before paring most of its gains. It closed at 26,554.39, having gained 11.06 points, or 0.04%. Big banks Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co (JPM) led the advance.

Dow Jones Industrial Average pares most of its gains Monday. | Chart via Yahoo Finance.

The broad S&P 500 Index of large-cap stocks rose 0.1% to 2,943.03, a new all-time high. The bulk of the gains was concentrated in just two sectors: financials and communication services.

The technology-focused Nasdaq Composite Index also set a new peak, climbing 0.2% to 8,161.85.

Trump Appointee: Dow Could Collapse to 2,400 on Democrat President's Watch

Trump's next Fed pick believes a Democrat victory in 2020 would trigger a historic stock market crash and send the Dow back to Reagan-era levels. | Source: Gage Skidmore/Wikimedia Commons

The Dow could experience a meteoric price collapse akin to the Wall Street crash of 1929 if Democratic ideals usurp the White House. That’s according to Stephen Moore, President Trump’s next Federal Reserve Board appointee.

In an interview with the Washington Post, Moore said the U.S. stock market would experience the biggest selloff in history if Democratic ideas “come into play and enter the White House.” As The Wall Street Journal pointed out, even if the Dow matched its performance between September 1929 and July 1932, it would reach 2,400. That represents a decline of more than 24,000 - or 91% - compared to today’s levels.

The blue-chip index first reached 2,400 during the Reagan era and has more than quadrupled since the 2008-09 financial crisis.

President Trump’s first year in office was a boon to the U.S. stock market, as volatility fell to its lowest level on record. After a blowout 2017, the stock rally began to waver in the first half of 2018, eventually paving the way for a bear-market reversal in the fourth quarter. Stocks have since rebounded more than 20% off their December lows.

The rally has been aided by a Federal Reserve that is reluctant to raise interest rates any further. Now and for the remainder of 2019, the federal funds rate is expected to hold at current levels, according to Fed Fund futures prices. While this is a good thing for the Trump administration, the long-term implications of low interest rates may be less desirable.

Click here for a real-time Dow Jones Industrial Average price chart.

Last modified (UTC): April 29, 2019 4:13 PM

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Sam Bourgi @hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com

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