For more than a century, successful US Republican Party nominees have sparked rallies in sharemarkets upon election. But markets are betting a Trump victory will lead to a sharp decline in the value of shares, according to research by economists Justin Wolfers of the University of Michigan and Eric Zitzewitz of Dartmouth College.

"Markets expect equities to be worth more under a President Clinton, despite the fact she has proposed capital tax increases and Trump has proposed cuts," the economists write in their paper released over the weekend titled What do financial markets think of the 2016 election?.

Conservatives hegemony over the title of "best economic manager" through the pursuit of lower taxes appears to be over.

The finding has important implications not only for the US, but for the political economic debate across the world, not least in Australia where the Labor Party recently won significant electoral gains, despite promising higher capital gains tax.

But first, how can we tell what financial markets think of a Trump victory?

The economists produce their predictions by studying market reactions to two crucial events – the first presidential debate on September 26 and release of the Trump tape on October 7 – both of which lead to sharp rises in betting market assessments of Hillary Clinton's chances of winning the presidency.

In doing so, they find strong evidence of a "Trump discount" and "Clinton premium".

"During the debate event window, US, UK and Asian stock markets rose, crude oil rose, the currencies of trading partners such as Mexico, South Korea, and Canada rose against the dollar, and expected future US stock market volatility dropped sharply," Wolfers and Zitzewitz write.

"Given the magnitude of the price movements, we estimate that market participants believe that a Trump victory would reduce the value of the S&P 500, the UK and Asian stock markets by 10 to 15 per cent, would reduce the oil price by $4, would lead to a 25 per cent decline in the Mexican peso, and would significantly increase expected future stock market volatility."

The finding is clear: a Trump presidency will mean lower share values, lower interest rates, higher volatility and a less healthy economy overall, not just in the US, but globally.

"A Trump presidency is not seen as uniquely harmful to the United States, but rather is a broad global threat that impacts each of the equity markets we have studied."

The economists calculate the Australian dollar would be about 8 per cent weaker under a Trump presidency compared with a Clinton presidency.

Many policymakers here would welcome a lower Aussie dollar, but not for the reasons that would produce it: tanking prospects for global growth and trade.

But regardless of who wins this US election, the economist's finding that financial markets have rejected the Trump campaign in favour of the Democrat alternative has significant ramifications.

A powerful businessman goes to an election promising lower capital taxes, which would directly boost the after-tax returns of listed companies.

But markets aren't buying it.

In part, scepticism may reflect doubt a President Trump would actually do what he says. Certainly, markets expect higher volatility if Trump is elected. It may be that their support for Clinton reflects a preference for an "insider" candidate who supports the existing political and economic structures, rather than wanting to turn over the table completely.

Or, it may just be that the era of lower taxes as a panacea for all economic ills is resoundingly over.

The perceived economic supremacy of the Republican Party is deeply rooted in US history, as it is in Australia.

Bookies have been taking bets on US presidential outcomes since about 1880, when they used to stand on the street curb outside the NY Stock Exchange. Aligning this data with sharemarket moves post election, the economists previously found strong evidence of a "Republican premium".

The Republican premium was largest in the half century before World War II. Since then, it had been diminished amid "the moderation of left-right differences on economic policy during the Cold War". But, still, it remained.

Until now.

Today, the owners of large publicly listed companies apparently believe their interests are best represented by the Democratic Party, not their traditional allies in the Republican Party.

Not only has the "low tax" mantra been rejected by bleeding-heart left-wing voters, but now by the financial establishment, too.

There are parallels in Australia, where Malcolm Turnbull's pledge to cut company tax to promote "jobs and growth" was not enough to halt a dramatic electoral slide earlier this year.

Increasingly, the dynamics of both these elections suggest politicians looking to put all their economic eggs in the basket of lower taxes will fail to convince.

Policies to ensure a more equitable distribution of the fruits of economic growth, ending unfair tax loopholes and investing in public infrastructure and skills today offer more compelling political narratives not just for the occupants of main street, but Wall Street, too.

Ross Gittins is on leave.