How Important Is The US President To Investors?
The US Election has been completing with COVID for the top news story for months. This will be the 9th US Election I have witnessed as a professional financial adviser. The US stock markets are the largest and so they are important to international investors. But just how important is the person sitting in the Oval Office to investors?
US Election Results Vs Stockmarket Performance
Purely looking at the two main parties economic philosophies, stock markets should do well when Republicans are in power. Equally, when Democrats are elected you would expect to see lower performance.
However, the image on the right, with data stretching back almost a century, shows a different story.
The most accurate statement which can be made is the long term performance of the US markets is not impacted by whoever is in office.
What About President Trump?
When Donald Trump was running for election, the majority of experts said he would be very bad for investment markets. It is true, initially, there was a small drop of about 5%, however, the red dot on the graph shows the date he was elected. As you can see the long term trend remains positive. The net result of President Trump’s first year in office was 20% growth in the S&P500 [a leading US Stock Market Index]. In the 8 years prior to the start of the Trump administration, President Obama (Democrat) saw the S&P rise by 113% whilst his predecessor, President Bush, (Republican) saw a 30% decline.
One of the most successful investors of all time, Warren Buffet, says that you should not mix your personal politics and your investment decisions.
The return on investment markets is influenced by a myriad of factors. The US election is just one and it is relatively short term.
Over the long term, equity investors have been rewarded for staying the course. Stick to a long term strategic plan, rather than attempting to outwit the markets.