Should Stock Market Investors Be Rooting for a Donald Trump or Joe Biden Victory?

March 25, 2024

I’ve said that politics should not play a primary role in whether or not you invest in an election year.

But when it comes to the stock market, does it matter whether a Republican or a Democrat gets elected?

Former President Trump seemed to think so during the run up to the 2020 election. Reuters points out, “In a 2020 debate with Biden, Trump said that if Biden won the election, "the stock market will crash."1

He did say that. You can watch it here.

More precisely though the former President qualified the statement a sentence later saying: “The biggest analysts are saying that.”

I don’t recall who those analysts were or whether this was a Trumpian superlative, but either way—at the time of this writing—the stock market is up significantly under Biden.

Since the Inauguration of President Biden, the Nasdaq is up 21.6%, the Dow Jones Industrial Average is up 26.6%, and the S&P 500 is up 35.6%.

However, politicians have a knack at spinning data about the stock market.

For example, back in January, the former President has now taken credit for this stock market, saying on Truth Social, “THIS IS THE TRUMP STOCK MARKET BECAUSE MY POLLS AGAINST BIDEN ARE SO GOOD THAT INVESTORS ARE PROJECTING THAT I WILL WIN…”2

The Biden administration would also like to take credit for the stock market’s performance. Politico notes how, now that the market is going up, President Biden, who used to be reluctant to point to stocks, is now happy to:

It’s a messaging shift that makes some Democrats uneasy, given the likelihood of market volatility and the inequality among investors. It’s also a break from Biden’s own stance during the last election when he knocked then-President Donald Trump for focusing on the strength of stocks.

“He thinks the economy is doing well if the Dow Jones is doing well,” Biden said on X, formerly Twitter, in October 2020. “Believe it or not, Mr. President, most Americans don’t live off the stock market.”

Fast forward to last Saturday, when Biden used X to tout “good news” for folks to start the weekend: “The stock market going strong is a sign of confidence in America’s economy.3

Let me get this right. When the stock market is beginning to rally after the COVID crash under President Trump candidate Biden does not think it’s an important economic measure for most Americans, but when it’s going up now under his Presidency, it’s a good economic indicator?

Mr. President(s) is that really how all this works?

It will be fascinating to see how both Trump and Biden spin this if the market starts to fall again before the election.

If you take the credit when things are good, you get to take the blame when it’s bad.

As President Harry Truman’s sign said: “The Buck Stops Here”.

The point I’m trying to make by raising all this is that I’m concerned with investors getting all wrapped up in the political present and making investment decisions that might harm their future. As a financial advisor, I’m not interested in looking out on a timeline of one Presidential term. I’m concerned with the lifetime of our clients and readers—whether they are young or old—and their families.

This chart from BlackRock is really all you need to know about the danger of partisan investing and only investing if your presidential party is in office.4

This is not to say it doesn’t matter how you vote. It matters. Significantly.

What it shows is that if you invest only if your Presidential candidate wins and do not invest because your Presidential candidate loses, you’ve likely made a regrettable decision.

In our politicized climate, you may not want to hear it, but that’s what the data since 1953 has shown.

We also know that we live in a system with checks and balances, and that there is much more to the government and the economy and stock market than one person in the Oval Office.

As JP Morgan demonstrates in the chart below, the economy (measured by GDP) and the stock market (measured by the S&P 500) perform well regardless of whether Democrats are in control, Republicans are in control, or there is divided government.

Of course, a Republican could look at this chart and say to his Democrat friend across the table at a restaurant, “See! We are better for the stock market!”. The Democrat could snap back, “Ya, but you’ve only had control 10% of the time, and we’re better for the economy.”

And this kind of back and forth could continue endlessly.

Or they could both look at each other and say, “Wow. The United States of America has done well in the economy and the stock market overall. It would have been a very bad financial decision to go into economic and investment hibernation every time my party didn’t win.”

Elections have consequences.

Whether or not you choose to invest according to partisan politics does too. 

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Sources:

1: “Trump bemoans record stock market as just making ‘rich people richer’, Tim Reid, December 17, 2023. Accessed online: Trump bemoans record stock market as just making 'rich people richer'

2: Donald J. Trump on Truth Social, January 29, 2024. Accessed online: Donald J. Trump (@realDonaldTrump)

3: “Biden’s Risky New Bet: The Stock Market”, February 14, 2024. Accessed online: Biden’s risky new bet: the stock market

4: “How the U.S. election may impact your portfolio”, Mark Peterson, February 16, 2024. Accessed online: Investing and portfolios in Election Years