Given the reality that the Trump presidency has defied many long-held beliefs about the highest office in the land, it seems possible that it may also defy convention when it comes to the impact this president may have on the financial markets and economy.
The stock market tends to enjoy its best years during the third and fourth year of a president's term, a tendency the Stock Traders Almanac has quantified for decades, chronicling the impact of the so-called "presidential cycle." Since it has been widely assumed that most presidents tend to make hard decisions, especially about the economy, early in their time in the White House, it has been observed that stocks do more poorly in those first two years than in the second two.
It can be explained in this manner: Just when the economy needs a little boost, conveniently some would say, a year or so before election time, any administration tends to kick-start the economy with some fiscal stimulus. Whether it be a hefty tax cut, some road and bridge construction in key geographic locations, extra defense spending, or anything that "primes the pump" as economist John Maynard Keynes described it. Presidents like to kick it up a notch to ensure voters are happy come November.
Indeed, when that doesn't happen, there can be dire consequences for the incumbent. George H.W. Bush was forced to raise taxes, breaking a key campaign promise, even as the Federal Reserve was raising rates, toward the end of his first term. The result was somewhat predictable. With a recession dogging him in 1991, Bush, also weakened by Ross Perot's third-party bid, lost to Bill Clinton. Clinton came into the White House at the bottom of the economic cycle and rode the wave for eight years.
For President Donald Trump, who was elected during the seventh year of an economic recovery, his first bid was to pass a massive tax cut that appears to have shifted the economy into ultra-high gear, while also increasing government spending dramatically in his first two years. Dousing a smoldering economy with two types of gasoline, the Trump Administration got what it wanted, stronger growth, soaring corporate profits, a booming stock market and, to a lesser extent, rising wages.