Election Years, Presidents, and the Stock Market

“Oh my goodness - if ____ wins, the stock market and the economy is going to tank.”

“What?! Ha, no - if _____ wins, the stock market and the economy is going to tank.”

Sound familiar? Maybe even within our own heads? 

Historical data tells a pretty convincing story that it doesn’t really matter who is in office, as far as the stock market goes. (Cue “This time is different!” chorus.) 

There are a lot of different ways to measure this, but I found the following helpful.

The first looks at a 60% stocks, 40% bonds portfolio and how it has performed since 1860 based on the presidential party in the White House. Democratic presidencies eked out a 0.2% annualized edge - but by and large, there’s minimal material difference. Source: Vanguard. 
Another way of looking at this is what the stock market returned under each President, shown below in different party colors. (And let’s give George W. some slack as he was chief during the dot-com explosion, the WTC attacks, and the subprime bubble - all of which would have been difficult for him to prevent.) Source: Dimensional Fund Advisors
And lastly, although it FEELS like the market moves a bit more leading up to and in the months following an election, that’s not the case either - as measured by the volatility of the S&P 500 Index. The annualized volatility of the index is 15.7%, while the 100 days before and after a presidential election shows an actual decrease. Souce: Vanguard.
The reality is, as much as our political bias can’t admit it (and Presidents sometimes claim themselves) - the President of the US just doesn’t have that much of an impact on the stock market. Ben Carlson writes more on this as well. 

And so - like much else in our investing world - the best plan is to simply stay the course. Regardless of the year. Even if that makes for some boring conversation. 

Interesting Resources

Tim Keller (Counterfeit Gods)
When idolatry is mapped into the future - when our idols are threatened - it leads to paralyzing fear and anxiety. 

When idolatry is mapped into the past - when we fail our idos - it leads to irremediable guilt. 

When idolatry is mapped onto the present - when our idols are blocked or removed by circumstance - it roils us with anger and despair. 

Politics Don't Matter... to Your Portfolio
3 min read | Retirement Field Guide
My good friend Ashby cut straight to the core on this piece (something I also appreciate about our friendship). He used the below chart from Invesco that shows the growth of $10,000 in the Dow Jones Industrial Average since 1896 fully invested, and then only being invested when a Republican is in office vs only being invested with a Democrat is in office. It is quite shocking. 
3 Min Video | Pittsburgh Dad
I missed the Pittsburgh Dad, who is right back at it. I don't think you have to be a Steelers fan or be familiar with Pittsburgh to find it funny (but I could be wrong). "Forget Covid! I'm worried these guys all got mono. Maybe they're trying to social distance themselves from the end zone." 

The 9 Best Income Producing Assets to Grow Your Wealth
23 min read, but skimmable | Dollars and Data
Interesting article on the various ways to use income-producing assets to grow wealth. From stocks to bonds, farmland to royalties, it covers a fast amount of content and summarizes with expected compounded return, risk, and a pro/con list. One notable exception, however, is entrepreneurship. Although Nick talks about owning your own product, it's more in the idea of books, guides, and courses. Working with business owners for over a decade now, and speaking from some personal experience, creating our own business is a substantially lucrative venture. It's not for everyone, but I think Nick could have rounded out his list to an even 10 by including it. Regardless, it's a good read. 
Next time that we're tempted to fret about whoever may end up in the White House in a few months as far as what it could do the the markets, I hope we can remember to think long-term. And next time, around the virtual or physical water cooler or family table, maybe these will provide some calming talking points as well.

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