We are just over a month away from the US presidential election between President Donald Trump and candidate Vice President Joe Biden. As divided as people’s opinions are on Donald Trump, clients are feeling a bit nervous about what direction the stock market will take after the election and what will happen to their savings as a result of this election.
Republican presidents have always been seen as pro business and better for the economy. Of the last 9 presidents going all the way back to Nixon, only two presidents saw negative returns in the S&P 500 during their term, Nixon and George W Bush. All other presidents, bar Trump, saw double digit returns during their term including the three Democratic presidents in the period.
While US presidents can make conditions easier for business, they are just one factor at play. No matter who is in the White House, the US is a capitalist country and a left leaning president will not be that far to the left. There are also lots of other factors that will influence the value of a company such as the interest rates, other countries economies, taxes etc.
For instance, one of Trump’s key actions as president was to cut regulation. This has particularly benefitted the oil and finance industries. With it easier and less expensive to do business profits, you would expect profits to soar. Wrong! Since election day in 2016, both of these industries have lagged behind the S&P 500 and the Nasdaq.
As we can see from the graph below, if you are invested for the long term (and most pension investors are), who is in the White House has little relevance on how your investments do. We can see that over the long term, the value increases no matter which party is in power.
If you have any questions, drop me an email at steven@bluewaterfp.ie
Steven Barrett
28 September 2020