One of the key markers of the health of an economy is GDP—“the total market value of the goods and services produced within the United States in a year”.1
But many Americans don’t see it that way.
All too often a person’s perception of economic conditions is shaped not by actual economic data but by their political leanings.
The chart from JP Morgan Asset Management spanning from Bush to Obama to Trump to Biden illustrates this phenomenon:
The results show that Republicans often feel better about the economy under a Republican president, while similarly Democrats often feel better about the economy under a Democratic president. Yet, average annual returns on the S&P 500 during the Obama administration of 16.3% and during the Trump administration of 16.0% were almost identical and higher than the average return over the last 30 years. Also, GDP growth is typically not impacted by who is in office.2
Has this pattern changed in the transition between Trump and Biden?
Not according to one recent poll:
Before Trump took office in January, 48% of Democrats and 14% of Republicans said they thought economic conditions in the US were good, and now, 48% of Republicans and 14% of Democrats feel that way.3
This makes you wonder: Are we evaluating the economy or simply our preferred President?
What about the data right now? According to the Atlanta Fed’s indicator, the GDP numbers forecasted are not looking good.
If GDP does indeed drop for two consecutive quarters and enter recession, that has not normally been a good sign for the stock market over the short term in the past.4
Despite stock market bears and recessions, how has the American economy has performed throughout the decades? The GDP chart tells the story:
The growth has been spectacular.
Yes, there have been recessions—indicated by the yellow bars—but notice how recent downturns weren't necessarily directly related to presidential administrations it occurred under but rather to specific events like the Great Financial Crisis and COVID-19. The economy is complex.
And it has grown massively through the years.
The takeaway: Be cautious when forming your view of the economy through the lens of your political party affiliation.
Why do I emphasize this point so frequently?
Because I witness this behavior consistently. In my experience, political bias has been one of the most significant factors influencing investors' decisions.
And while the economy may survive a politician you don’t like, your investment portfolio may not thrive if you let politics drive it.
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Sources:
1. Bureau of Economic Analysis (US Department of Commerce). Accessed online: https://www.bea.gov/system/files/2020-04/GDP-Education-by-BEA.pdf
2. “Guide to the Markets”, February 28, 2025. Accessed online: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/
3. “CNN Poll: Optimism about the economy sags as 55% say cuts to federal programs will cause harm”, March 13, 2025. Accessed online: https://www.cnn.com/2025/03/13/politics/cnn-poll-economy-worries/index.html
4. Callie Cox via LinkedIn. Accessed online: https://www.linkedin.com/feed/update/urn:li:activity:7311099836857024512/