Biden or Trump? It Doesn’t Really Matter for Stocks

The S&P 500 has powered to new highs for 11 of the previous 12 presidents, and bulls hold the long-term edge. Don't expect that to change.
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Excluding the coronavirus selloff, the stock market has been on a powerful, multi-year run.

Investors can debate President Trump’s handling of Covid-19 until they’re blue in the face - and many have - but it’s hard to argue that the stock market has done poorly. It’s also hard to argue about its performance during President Obama’s eight-year run.

That’s why I think the outcome of the 2020 election is less important than many investors seem to be fearing. At least in the way it relates to stocks. 

Because Trump supports low taxes and is pro-business, a Biden victory has investors fearing an economic and stock market collapse.

The truth is, an economic collapse has a lot more to do how we rebound from the coronavirus than who’s sitting in the Oval Office.

At the end of the day, people need to make a living and they’re going to do it regardless of who the president is. But my opinion doesn’t mean very much. So let’s use numbers instead.

The Stock Market and the Election

70-Year annual chart of the S&P 500.

70-Year annual chart of the S&P 500.

Obviously the day and week of the election can be volatile, (especially when there’s a jobs report thrown in there on Friday). But that’s really just noise.

As it pertains to this year’s election, the only variable not priced into the market at this point is a deeply contested election. The market is a numbers machine. It’s constantly pricing itself based on what the most likely future outcomes are and it craves certainty.

Currently, Biden is the favorite to win the election - just like Hillary Clinton was four years ago. If Biden wins and there is no long-lasting fight over the results, then the market may experience a relief rally. Why?

An uncontested (or even just a minimally contested) Biden victory shouldn’t crash the market, simply because the market is likely anticipating his victory.

In regards to a Trump victory, it likely will be seen by the stock market as a surprising positive. We may not see the post-election surge that we did in 2016, but Trump’s low taxes and pro-business approach likely woud ease investors’ worries.

Like the economy though, one person does not pull all the strings. Just like individuals will go to work to put food on the table, businesses will keep humming regardless of who occupies the White House. Therefore, the stock market will continue to move on its own, too.

This is important, so listen up: Going back to 1953, the U.S. has had 12 presidents. Seven of those presidents were Republican, five were Democrat and both parties each had a vice president take over once. That was President Johnson, a Democrat, and President Ford, a Republican.

Every President in that span has seen the S&P 500 hit new all-time highs with the exception of President Ford. However, he served just 30 months.

That’s not to say there’s been a roaring bull market for every administration - President George W. Bush barely saw new highs during his time in office, for instance. But by and large, stocks have continued higher regardless of White House leadership.

Statistically, the stock market spends more years rallying than it does falling. What’s more, the “up” years generate larger average gains than the average losses investors experience in the “down” years.

At this point, I’d be more concerned about global lockdowns, the race for a vaccine and the impact of Covid-19 on our lives and economy, than I would be about the next president of the United States.