There is a lot of economic optimism for the new Trump administration, especially since it comes after four years of Democratic leadership. Reduced regulation and taxes are economically stimulative. Yet, four of the five times the presidential party has flipped from Democrat to Republican since The Great Depression, the new administration had a recession in their first year. The only time it didn’t happen was Trump’s first term where a recession started three years after he took office. Going the other way, in the six times when Democrats took over for Republican administrations since The Great Depression, four of them had no recession during their terms and the other two had recessions three or more years after they took office; Roosevelt and Carter.

It doesn’t have anything to do with the relative policies of the parties. This phenomenon is a result of how business cycles affect elections. Recessions tend to elect Democrats because more public services are wanted to mitigate the current one and more regulation is wanted to prevent the next one. This has often meant that Democrats have often been elected after a recession and spend most of their time in office after a fresh expansion has started. Conversely, boom times tend to elect Republicans because voters want less regulations for easier access to the boom and fewer public services. These party-flipping Republicans tend to get elected at the end of booms, right before a recession.

I suspect this phenomenon broke down with Trump’s first administration because of the long economic stasis after the Great Financial Crisis. Obama’s Presidency did not have a boom (see purple circle in table below.) The electorate wanted a change, and Trump was elected in 2016, before that business cycle’s boom happened. Trump’s first term began with the Fed beginning to raise rates. His second term starts with the Fed beginning to lower rates; opposite points of the business cycle.

Trump’s second administration has re-aligned with the business cycle to be typical. It is starting after reliable recession indicators (not soft-landing) have signaled: yield curve inversion to de-inversion, unemployment rate rising, and Leading Economic Indicators falling; what I call the recession trifecta. Job growth has been slowly decelerating for three and a half years, and five years have passed since the last recession this month. Five-years is the average length of time between business cycles back to The Great Depression (including soft-landings.)

While there is a lot of optimism now for the stimulative tenets of Republican policies, the business cycle has overwhelmed them historically. I continue to expect a recession around the middle of this year.