I’m sure you are watching the election developments with interest and wondering how the outcome will affect your investments.
Politics are innately emotional. They bring up both hopes and fears. However, prudent investors do not allow emotions to drive their investing decisions. Regardless of your or my personal political beliefs, we all benefit from taking a step back to talk about how the election could impact the economy, the stock market, and your investments.
How much impact does the president really have on the stock market? Not as much as you might think. The president sets the tone for economic policy and nominates (then the Senate confirms) the head of the Federal Reserve. They do not single-handedly change taxation or boost corporate earnings. The sitting president is often given far too much credit or blame for how the markets are doing.
Which party is best for the stock market?
Here is an interesting quote from research done by Liz Sonders and Kevin Gordon of Schwab:
“Let’s bring this report home with another broad take on historic market performance. Again, using the post-WWII period, an investor who put $10,000 into the S&P 500 at the beginning of 1948 would have seen that grow to about $312,000 by the end of 2023 if the money was only in the market under Republican presidents. Conversely, $10,000 grew to more than $1.2 million by the end of last year when only invested under Democratic presidents.”
So, should an investor invest only under Democratic Presidents? Hardly.
Liz and Kevin go on:
“Shame on anyone stopping the analysis there by exclaiming that investors would have been much better off only investing when Democrats were in the White House. An investor who did not care whether the Oval Office was painted blue or red, and kept their money in the market, saw that initial investment grow to nearly $38 million. I don’t know about any of you, but I’ll take the $38 million and let the $1.2 million and $300,000 folks duke it out.”
The market knows there will be different challenges with any candidate, and some sectors do tend to perform better for a short period of time after a new president is elected. However, this is generally short lived and does not impact the entire market.
The message? The most successful investors do not allow political preferences to dictate investment decisions.
This commentary reflects the personal opinions, viewpoints and analyses of the Bourke Wealth Management employees providing such comments, and should not be regarded as a description of advisory services provided by Bourke Wealth Management or performance returns of any Bourke Wealth Management client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Bourke Wealth Management manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Sources:
https://www.investopedia.com/presidents-and-their-impact-on-the-stock-market-4587369
https://www.wsj.com/finance/investing/investing-strategies-presidential-election-2024-7bb43edd
https://www.nytimes.com/2024/08/22/business/trump-stock-market.html#
https://www.schwab.com/learn/story/party-usa-election-facts