Nobel laureate Robert Shiller predicts that if President Donald Trump wins a second term the stock market will continue to soar and delay any looming recession.
Shiller, who is known for his behavioral finance research, believes the president’s pro-business policies would resonate with Wall Street for another four years.
“It also seems likely that when Jerome Powell’s term as Fed chairman expires, he’ll bring someone in that he controls more, and bring someone who can stimulate the economy without worrying,” the Yale University economics professor told CNBC.
“It’s also that Trump is a model for extravagant living and big spending. All these things are boosting of the stock market,” said Shiller, the co-founder of the Case-Shiller Index, which tracks home prices around the nation.
Trump enjoys a “narrow advantage” over rival candidates heading into the 2020 election given the outlook for the U.S. economy, Bloomberg reported, citing analysts at Goldman Sachs Group Inc.
Incumbent presidents carry a 5 to 6 percentage-point edge over rival candidates in the popular vote and Goldman Sachs’s economic forecast also leans in favor of Trump, although that is partly offset by his negative approval rating, economists Alec Phillips and Blake Taylor wrote in a report released late on Saturday.
“The advantage of first term incumbency and the relatively strong economic performance ahead of the presidential election suggest that President Trump is more likely to win a second term than the eventual Democratic candidate is to defeat him,” said Phillips and Blake.
Goldman Sachs currently predicts the U.S. economy will grow 2.5 percent this year and 2.3 percent in 2020, a pace that will be enough to push unemployment down to 3.3 percent next year from 3.7 percent this year.
Historically, Phillips and Taylor found variables such as employment and income are better indicators of an election result than market-based forces such as equity or oil prices. The performance of the economy in the second quarter of the election year is often a strong guide to the result, they said.
Under Trump, the stock market has continued to build value, and Trump’s policies continue to drive job creation. The gross domestic product, a broad measure of the national economy, also continues to grow, with a 2.9% increase in 2018.
More than 20 Democrats are vying for Trump’s job, including Vermont Sen. Bernie Sanders, California Sen. Kamala Harris and, potentially, former Vice President Joe Biden.
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