Mark Weisbrot
The Hill, October 4, 2016

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Republican nominee Donald Trump’s embarrassments and scandals keep piling up, from his Twitter meltdown last Friday night to The New York Times revelations that he could have gotten away without paying income taxes for the past 18 years.

These may have some impact on the race, although it’s tough to guess how much. But a recent piece in the Times about Trump’s potential influence on the stock market could really take some votes away from him, if it happens to go viral.

The article, by economist Justin Wolfers, estimates that a Trump victory on Nov. 8 will take 10 to 12 percent off of the value of the stock market. It’s a crude estimate, but the logic appears to be sound. He bases it on the performance of stock market index futures on the evening of the September 26 presidential debate. To summarize very briefly, when Trump was doing badly in the debate — e.g., when Democratic nominee Hillary Clinton was hammering him about his tax returns and prediction markets indicated that his chances of winning the election were falling — the stock market index futures went up. The correlation is strong enough to extrapolate an estimated impact of an actual Trump win.

There are many people currently planning to vote for Trump on Nov. 8 for mostly personal monetary reasons. Some of these people may share his opponents’ views that Trump is unqualified to be president, to put it politely, and neither like nor trust him personally. But they will vote for him, and often any Republican, because they figure their taxes will be lower than under a Democratic government. Call it “vote buying,” if you will; this is a core constituency of the Republican Party.

These Trump-leaning voters are overwhelmingly white, some with significant accumulated savings. Maybe not quite the picture that Bill Maher described at the Republican convention — “Old white people in funny hats, dancing awkwardly … it looked like Motown night at an assisted living center” — but those who are voting on the hope of lower taxes for themselves are mostly not young.

Now, contrary to the impression you might get from the business press, the majority of Americans — 51.2 percent according to the Federal Reserve’s “2013 Survey of Consumer Finances” — have no investments at all in the stock market, either directly or in retirement accounts. And most of those who do have some investments in the stock market have relatively little: the median is about only about $27,000. However, as we move up the income ladder, into the upper deciles, stock holdings rise. For those in the 50th to 90th percentile of income, the average holding is $132,000, and $969,000 for the top 10 percent.

Even taking into account that the median is much lower than the average, this still leaves many millions of people with significant stock holdings — more than enough to bury Trump if even a fraction of them believe that his election will tank the stock market.

The loss from a 10 to 12 percent fall in the stock market would vastly exceed any gains for these voters, real or imagined, from a Republican tax cut.

Although the stock market is not currently in bubble territory, there are many people who are worried that it is, or might be; and that increases the fear factor of a Trump presidency for those voters who have significant savings in the stock market.

Trump had better hope that this inconvenient finding — that the markets are as afraid of a Donald Trump presidency as the average Democrat — doesn’t reach too many of this particular base of “personal finance” voters. If it does, it could sink him faster than the next 10 cringeworthy abominations that come out of his mouth or Twitter feed over the next four weeks. 

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C., and the president of Just Foreign Policy. He is also the author of “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (2015, Oxford University Press). You can subscribe to his columns here.

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