The shocking news that President Trump and the first lady tested positive for COVID-19 scrambles every assumption we have about the election, the economy—and pretty much everything else under the sun. (Isn’t it always the case when someone says ‘things couldn’t get any crazier,” they usually do.)
First of all, everyone, regardless of their political stripe, should rise above the partisanship and wish the Trumps a speedy recovery. It’s gratifying to see critics like MSNBC’s Joe Scarborough and Dr. Howard Forman of Yale, to name two, doing just that. Second we could well see more cases close to Trump and the White House, even by those who’ve tested negative since the president’s disclosure, as the incubation period is up to 14 days.
You might be tempted to say that like so many events this year, the president contracting COVID-19 is unprecedented and because of that, our nation will be feeling its way forward with no history to guide us. That’s actually not quite the case. While of course no president has ever been infected by the coronavirus, nor has any been potentially this sick a month before the election, our nation has endured all manner of presidential maladies—and worse—and survived, nay thrived.
Let’s take a minute here to disentangle politics from economics. As Willis Sparks of the Eurasia Group says, it's true that depending on how this plays out, “the risk of chaos in the 2020 US presidential election just went way up.” Meaning if you game theory what might transpire over the next four months, things could get kind of hinky (and I’ll get to that.)
As for the economy and the market, less so. Yes, a sick president in his 70s—especially with a disease that affects people very differently (one of the biggest mysteries of COVID)—certainly isn’t a positive. “Over 7 million Americans have had this virus and many of them have what we call long symptoms; shortness of breath, blood clots or kidney damage or other foggy thinking. There's a lot of neurological complications,” Dr. Dara Kass, a physician with Columbia University told Yahoo Finance. “This virus has an unpredictable course and a patient like President Trump who is elderly, obese and male is a high risk for acute and long-term complications.”
So I sure wouldn’t expect stocks to rise while Trump is ill (though they might pop if he recovers quickly.) “It adds to uncertainty,” says Kevin Mahn, CIO of Hennion & Walsh. “It’s hard to make a valid argument there will not be more volatility ahead.” As for serious, long term damage, negatory. “How does presidential political turmoil affect the stock market,” asks financial writer John Waggoner? The answer: Usually not much, or for long. “The stock market worries only about events that could trigger a recession,” said Sam Stovall, chief investment strategist of U.S. equity strategy for CFRA. “Politics makes for great headlines, but only recessions put a dent into bottom lines.”
So yes we saw the stock market decline yesterday, but only about 1%. That’s actually a bit less than what Yahoo Finance’s Jared Blikre found when he looked at the market in the wake of some other major presidential tragedies (including Reagan being shot, FDR’s death, and the JFK assassination.) In those instances, stocks dropped some 2% on average and recovered in about three weeks.
The president’s supporters may suggest that continued market and economic weakness is because investors fear a Biden victory, but I would attribute that action more to uncertainty than Biden winning, which, remember, looked like a distinct possibility before Trump got sick. A side note here: Chris Rupkey, managing director, chief financial economist at MUFG Union Bank notes that “This is the highest unemployment [7.9%] and worst economy for any president facing re-election in history and it will be a miracle if the incumbent can pull off a win.” Rupkey points out Jimmy Carter’s economy had an unemployment rate of 7.5% when he tried to win a second term in 1980 (and lost to Ronald Reagan), and George H. W. Bush’s had 7.6% in 1992 and he lost to Bill Clinton.
So the president had his hands full before he got sick.
Let’s now turn back to the president and COVID-19 and how things might play out. The overarching point here is that our nation has protocols and rules of law that speak to these scenarios. Let’s run through some.
First, President Trump (and I will leave aside the first lady’s health for the rest of this article) may have a mild case and recover within a matter of days. Of course the campaign will still be impacted as the president has to cancel some rallies, his preferred means for getting the message out. Still maybe it all works in the president’s favor. Greg Valliere, chief U.S. policy strategist of AGF Investments, says that “when Reagan was shot, he handled with humor and he got sympathy from the public, and it helped him. So this could ironically be a plus for Trump.”
Even if Trump’s case is mild though, it’s likely the next presidential debate on October 15, a week from next Thursday in Miami, will be impacted. How? Maybe canceled. Done by Zoom. Or outside. Who knows? Ditto perhaps for the third and last debate a week later in Nashville. Also the stakes for the VEEP debate next Wednesday in Salt Lake City just got higher perhaps, particularly for Vice President Mike Pence.
But what happens if the president becomes very sick, or incapacitated or even passes away? It would be tragic, but our country would endure. Presidents have become very ill in office, including George Washington, who had a number of serious maladies, (though who knows how much the public knew at the time.) Eisenhower had a heart attack in his first term (in maybe a case of Cold War jitters, the Dow fell 6.5% on the news, but recovered in short order) and a stroke in his second.
An interesting parallel for President Trump is Woodrow Wilson, whom the New York Times reported “became sick during Paris peace talks after World War I [in 1918] with what some specialists and historians believe was the influenza that ravaged the world from 1918 through 1920.” The following year—99 years ago to the month in fact—Wilson suffered a debilitating stroke in his second term and was incapacitated for the remaining year plus of his second term. Here too it’s unclear what was disclosed to the public, though we do know the stock market and economy began to roar into the 1920s under Wilson’s successor Warren Harding, (who, by the way, died in office of a heart attack in 1923 and was succeeded by Calvin Coolidge.)
If President Trump becomes very sick, it’s possible he or his team would invoke the 25th Amendment which in part stipulates a temporary transfer of power to a vice president. Presidents Reagan and W. Bush did in 1985, and in 2002 and 2007 respectively before colonoscopies (for those of you who follow that kind of thing.)
American legal scholar Cass Sunstein who worked in the Justice Department when President Reagan was shot in 1981, notes that the key word in the amendment is “unable” to perform duties. (Sunstein says Reagan’s wounds were much more serious than the public knew btw.) In one scenario, when the president is cogent, he decides, in another, when he isn’t, his team does. “If [the president] is capable of doing so, he himself must sign the declaration required...; if he cannot, the vice president and the cabinet must proceed…,” Sunstein writes. Conceivably that could be tricky.
A salient template however might be what happened to British Prime Minister Boris Johnson earlier this year. On March 27, Johnson, then 55, (the PM is 18 years younger than Trump) disclosed he had COVID-19 with mild symptoms, but on April 6, after checking into a hospital the day before, was rushed to the ICU. Somewhere along the line Foreign Minister Dominic Raab was deputized, (although to be clear there were some questions at the time about his authority.) Johnson left the hospital on April 12th but didn’t return to 10 Downing Street for full-time work until April 26. So counting the days, Johnson had nearly a full month of sickness. To be clear Johnson was very ill, according to NBC News: “Referring to how serious his condition was, Johnson said, ‘It could have gone either way.’" FYI stocks and the pound took a hit when Johnson first announced he was ill and when he went to the ICU. Here too, the impact was short-lived.
As for the worst case scenario, a president dying in office, it’s actually occurred eight times in our history, (that’s eight out of 45 presidents, or 17.8%.) Four presidents expired of natural causes, the aforementioned Harding, plus William Henry Harrison, Zachary Taylor, and FDR. Four have been assassinated: Abraham Lincoln, James Garfield, William McKinley and John F. Kennedy (in the latter case, the market fell 2.9%, but again recovered quickly and continued on a bull run.) After each death the vice president seamlessly assumed power. These were hugely cataclysmic events and yet here too we persevered.
If it were the case that President Trump passed away between now and the election, things could get complicated, (in an admittedly already potentially fraught environment), but again there is a road forward. While Mike Pence would become president, technically speaking he would not be the Republican nominee. Pence would have to be voted in by the Republican National Committee, which he would presumably be. The GOP would still need to pick a vice president at that point. (Are you ready Nikki Haley? Ivanka or Donald Jr.?)
Even more knotty would be if the candidate died or perhaps became incapacitated just days before an election, making it difficult to carry out that above-mentioned selection process before Election Day and getting a new candidate’s name on the ballot—never mind the question of what happens to the votes already cast, 2.6 votes for instance as of yesterday. What would happen to those ballots? You can read an excellent account of the intricacies in this FiveThirtyEight article.
Does maybe some good comes out of this? “Succession is a question but the US has a succession plan in place,” says Tom Lee, head of research at Fundstrat. “I think this is going to be a positive development for the path of the COVID-19 in the US., as it should boost compliance considerably and make many rethink masks. This would help contain the recent surge in cases and might even push further down the path of cases.”
You could be right Tom. Just don’t tell me things couldn’t get any crazier.
This article was featured in a Saturday edition of the Morning Brief on October 3, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.