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2024 Election - Illustration of investor thinking

The 2024 Presidential Election is getting closer

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An important question to consider:  Should investors be rooting for one side or the other? Republicans are usually seen as more “business-friendly” than Democrats, but has that translated to stock market outperformance?
Contrary to conventional wisdom, stocks have historically done better under Democratic presidents than Republicans. Starting with Eisenhower in 1953, we estimate the S&P 500 has delivered a 14.1% annualized total return when a Democrat was in the Oval Office, compared to 8.9% under Republicans. Overall, large-cap U.S. stocks returned 11.2% per year—enough to turn $1 into almost $2,000!
Presidents are not all-powerful. They can’t snap their fingers and make GDP go up, nor inflation go down. The United States has rule of law, separation of powers, and due process. It’s not easy to translate words into action, and there’s a big difference between talking points on the campaign trail and passing legislation.
When thinking about historical returns, consider all the other things that were happening in the world: Federal Reserve interest rate policy, financial crises, wars & other geopolitical events, bubbles, inflation, etc. The President doesn’t necessarily have control over any of these things.
For example, the S&P 500 returned 17.5% per year during the two terms of Democrat Bill Clinton, who benefited from the inflating of the dot-com bubble.  Then Republican George W. Bush (-3.8% annual return) was elected just in time for the popping of the dot-com bubble and the 9/11 terrorist attacks. Bush finished his second term near the trough of the Global Financial Crisis. Democrat Barack Obama (+16.2% annual return) benefited from the post-crisis recovery in stock valuations and a long stretch of zero interest rates. Stocks did well under Republicans Ronald Reagan (+15.1%/year), George H.W. Bush (+14.7%/year), and Donald Trump (+15.9%/year), but struggled during the Nixon/Ford administrations (+3.9%/year) because of the OPEC oil embargo, Watergate scandal, and high inflation.

Our conclusion is simple: Vote with your conscience, but try to avoid letting your political views influence your portfolio. There are 1,000 different factors that determine the short-term direction of the stock market, and the president is only 1 of the 1,000.  As always, diversification is key, helping to protect against any risks that arise from shifting political dynamics in the future.

Diversification is key

Diversification can help protect your portfolio in today's shifting political landscape. Start by getting a 2nd opinion from an experienced financial advisor.
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Matt Coffina, CFA

Matt Coffina, CFA, is the portfolio manager for Trajan Wealth’s Expanding Moat and Defensive Moat strategies. He seeks to invest in companies with strong and improving competitive advantages, above-average revenue and earnings growth, and reasonable valuations. Matt has more than 15 years of experience as a portfolio manager and analyst. Even if it weren’t his job, he would happily spend all day learning about businesses and trying to identify stocks with a favorable risk/reward tradeoff.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.

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