Ronald Reagan can tell us a lot about what the economy will look like under Trump

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With the uncertainty of President-elect Donald Trump's vague policies leaving economists wondering what the US economy will look like under a Trump administration, history may give us some clues.

According to Jeremy Hale, Graham Bishop, Maximilian Moldaschl, and Amir Amin — the asset allocation strategy team at Citi — a Trump presidency will probably go something like the Reagan years in the 1980s.

"Regardless, markets have started to price this in, and we think a shift in our base case is also due," said a note to clients from the team. "The 1980-84 episode may be of some use as a starting point for a historical comparison."

There are four economic scenarios the team sees playing out similarly to 1980-1984:

  • Stronger US dollar: "FX markets priced in the combination of fiscal easing/higher bond yields/hawkish Fed and a broad USD uptrend ensued, lasting for several years," said the note.
  • Fiscal stimulus: : "Double dip recession in 1980 & 81/82. Fiscal easing in two waves. Both starting during the respective recessionary periods, but fueled by a widening deficit and not just a drop in the denominator," said the Citi team.
  • Bond sell-off: Bonds "sold off on the back of fiscal ease, but also on aggressive Fed tightening," according to the note.
  • Equities jump, but then fall longer-term: "Initially traded higher in 1980, but sold off soon into the 1981 recession as earnings dropped and Fed hikes became too aggressive," said the Citi strategists. "Only thereafter – once the budget deficit really took off, the Fed stopped hiking and the recession ended – a lasting and strong equity rally entrenched."

So far, the reaction seems to be in line with the strategists' comparison. Bonds have sold off, the dollar hit its strongest levels since December, and stocks have popped with a new all-time high for the Dow Jones Industrial Average. The fiscal stimulus and recession remain to be seen.

Additionally, increasing inflation could lead the Federal Reserve to hike rates just like during the 1980-1984 period, which according to Citi might be dangerous for the market.

RELATED: Protests across the nation in response to Trump election win:

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Demonstrators protest outside of City Hall following the election of Republican Donald Trump as President of the United States in downtown Los Angeles, California November 10, 2016. REUTERS/Patrick T. Fallon
SOUTH GATE, CA - NOVEMBER 10: Students in South Gate protest the election Donald Trump as president in front of City Hall. (Photo by Irfan Khan/Los Angeles Times via Getty Images)
MINNEAPOLIS, MN - NOVEMBER 10: Protesters of President-elect Donald Trump march down the I-94 on November 10, 2016 in Minneapolis, Minnesota. Thousands of people across the country have taken to the streets in protest in the days following the election of Republican Donald Trump over Democrat Hillary Clinton. (Photo by Stephen Maturen/Getty Images)
Demonstrators gesture toward an approaching line of police officers as they stopped traffic on Interstate 580 during a demonstration following the election of Donald Trump as President of the United States, in Oakland, California, U.S. November 10, 2016. REUTERS/Stephen Lam

Thousands of anti-Trump protesters shut down 5th Avenue in front of Trump Tower as New Yorkers react to the election of Donald Trump as president of the United States on November 9, 2016 in New York City. Trump defeated Democrat Hillary Clinton in an upset to become the 45th president.

(Photo by Spencer Platt/Getty Images)

Protesters reach Trump Tower as they march against Republican president-elect Donald Trump in the neighborhood of Manhattan in New York, U.S., November 9, 2016.

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Protestors hanging onto a signpost shout slogans on 5th Avenue across from Trump Tower on November 9, 2016 in New York, after Donald Trump was elected as the next president of the US.

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People march in protest to the election of Republican Donald Trump as the president of the United States in Seattle, Washington, U.S. November 9, 2016.

(REUTERS/Jason Redmond)

Office workers show their support for protesters marching along Sixth Avenue, Wednesday, Nov. 9, 2016, in New York, in opposition of Donald Trump's presidential election victory.

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The Empire State Building is seen in the background as demonstrators hold a sign during a march against President-elect Donald Trump in Manhattan, New York, U.S. November 9, 2016.

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Demonstrators protest on top of a bus outside of the Trump Tower November 9, 2016 in Chicago, Illinois. Thousands of people across the United States took to the streets in protest a day after Republican Donald Trump was elected president, defeating Democrat Hillary Clinton.

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Remy joins protestors marching against Republican Donald Trump's victory in Tuesday's U.S. presidential election in Philadelphia, Pennsylvania, U.S. November 9, 2016.

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People try to reach Trump Tower as they protest against Republican president-elect Donald Trump in the neighborhood of Manhattan in New York, U.S., November 9, 2016.

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A demonstrator wears a headpiece depicting the crown of the Statue of Liberty during a protest in San Francisco, California, U.S. following the election of Donald Trump as the president of the United States November 9, 2016.

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Protesters burn an effigy of Donald Trump in Lee Circle before a march through New Orleans, La., November 9, 2016.

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Protestors rally against Donald Trump outside of Trump Tower, November 9, 2016 in New York City. Republican candidate Donald Trump won the 2016 presidential election in the early hours of the morning in a widely unforeseen upset.

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People protest against Republican president-elect Donald Trump in the neighborhood of Manhattan in New York, U.S., November 9, 2016.

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Demonstrators walk through Downtown San Diego in protest to the election of Republican Donald Trump as the president of the United States in San Diego, California, U.S. November 9, 2016.

(REUTERS/Sandy Huffaker)

A woman chants from a window as demonstrators march on Market Street in San Francisco, California, U.S. following the election of Donald Trump as the president of the United States November 9, 2016.

(REUTERS/Stephen Lam)

People climb a pole on Fifth Avenue outside Trump Tower during protests following President-elect Donald Trump's election victory in Manhattan, New York, U.S., November 9, 2016.

(REUTERS/Andrew Kelly)

Security forces stand guard in front of the Trump Tower during a protest against President-elect Donald Trump of Republican Party in Chicago, United States on November 9, 2016.

(Photo by Bilgin S. Sasmaz/Anadolu Agency/Getty Images)

Protestors brandish a tattered US national flag during a demonstration on 5th Avenue across from Trump Tower on November 9, 2016 in New York, after Donald Trump was elected as the next president of the US.

(MANDEL NGAN/AFP/Getty Images)

People take part in a protest against President-elect Donald Trump in New York City on November 9, 2016.

(KENA BETANCUR/AFP/Getty Images)

A protester carries an upside down American flag as she walks along Sixth Avenue while demonstrating against President-elect Donald Trump, Wednesday, Nov. 9, 2016, in New York. Thousands of protesters around the country took to the streets Wednesday to condemn the election of Trump as president.

(AP Photo/Julie Jacobson)

Protesters burn a U.S. flag while they reach Trump Tower as they march against Republican president-elect Donald Trump in the neighborhood of Manhattan in New York, U.S., November 9, 2016.

(REUTERS/Eduardo Munoz)

People take part in a protest against President-elect Donald Trump in New York City on November 9, 2016.

(KENA BETANCUR/AFP/Getty Images)

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"More specifically, judging by the historic precedent, investors should monitor the risk of the Fed tightening too much in response to fiscal stimulus and killing off the associated recovery," said the note. "Indeed, note how after a short lived pull back short end rates have repriced higher and the Fed Funds Futures strip is already pricing more Fed hikes than pre-election."

The Citi team did note that there were some key differences between the early 1980s and now that could impact how the market will perform. From the note:

"A key difference is that fiscal stimulus may now occur outside of a recession, suggesting that risky assets should be all else equal more supported. But valuations are also very different. In 1980, US equities traded on a (Shiller) P/E of 6.5x compared to a P/E of 24.2x now! Years of monetary policy support & QE driving valuations higher means starting points are very different."

Other differences include higher inflation in the 1980s, a weaker labor market with unemployment around 7.5%, and a Federal Reserve interest rate above 10%.

A word of warning, however, as the Citi team put it, "As always, historic returns are not an indication of future performance." Additionally, given the way Trump has changed positions in the past, it's unknown what parts of his agenda will get done.

Finally, Reagan had strong bipartisan support and won 44 states in the 1980 election. Trump lost the popular vote and carried 30 states, so Trump's mandate is probably weaker.

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SEE ALSO: One of Trump's major economic polices could lead to a 'global recession'

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