The stock market\u2019s return was negative for a presidential administration only when the country was in a financial crisis (2008) or experiencing a stagflationary spiral (1973).3<\/a><\/sup><\/p>\n\n\n\n Hypothetically, the best-performing portfolio from 1900 to 2023 was the \u201cbipartisan\u201d one that stayed fully invested during both Democratic and Republican administrations. Starting with $10,000, this portfolio grew to almost $9.9 million.<\/p>\n\n\n\n A \u201cpartisan\u201d portfolio, only invested during administrations of one party or the other in that 123-year span, underperformed by millions of dollars. The same $10,000 only invested during Democratic administrations grew to approximately $528,000. Invested only during Republican administrations, the initial $10,000 rose to just shy of $181,000.4<\/sup><\/a><\/p>\n\n\n\n The different results are, in part, because of the US stock market\u2019s consistent rise even during two world wars and major financial crises (the Great Depression and the 2008-2009 Global Financial Crisis). The more time investors spent participating in markets, the better their investments did.<\/p>\n\n\n\n Investors are often concerned that elected officials will radically re-engineer the economy. In fact, the composition of the US economy has been consistent for decades. Even single-party rule periods didn\u2019t result in significant change. The percentage of \u201csubstantive\u201d bills by Congressional term hasn\u2019t increased when one party controlled the executive and legislative branches.5<\/a><\/sup><\/p>\n\n\n\n Federal spending has outpaced taxes and other sources of government revenue in most years and across most administrations.6<\/a><\/sup> No party can claim fiscal responsibility. It hasn\u2019t been a significant issue for a variety of reasons, including the US having the world\u2019s largest reserve currency and nominal economic growth outpacing the interest expense as a percent of gross domestic product (GDP).<\/sup><\/p>\n\n\n\n For all the focus on the executive branch, I\u2019d argue that it\u2019s monetary policy<\/a> that matters more. The old adage holds true: Don\u2019t fight the Fed. Historically, presidents have been hurt or helped by monetary policy conditions. For instance, both Presidents Reagan and Clinton benefited from consistently falling interest rates. Both Presidents George H.W. Bush and George W. Bush were hurt by Fed tightening, an inverted yield curve, and a recession. President Obama benefitted from a benign rate environment (minus a brief moment in 2015-2016) during his term, and President Trump was the unfortunate recipient of tighter policy during his first two years.7<\/a><\/sup><\/p>\n\n\n\n Investors don\u2019t have to love what is going on in Washington, DC, to prosper in the markets. In fact, the S&P 500 historically performed the best when the president\u2019s approval rating was in the low range \u2014 between 35 and 50.8<\/a><\/sup> That means the market had delivered some of its best returns during periods when half or more of the country didn\u2019t approve of the job the current administration was doing! Still, it\u2019s hard to discern any direct relationship between a president\u2019s popularity, the health of the US economy, and the performance of financial markets.<\/p>\n\n\n\n Investors should be less interested in politics and more interested in private-sector business leaders who are going to harness artificial intelligence<\/a> and robotics. They may be able to help cure debilitating diseases, evolve the nation\u2019s energy sources, and develop new technologies and industries that aren\u2019t even on the radar.<\/p>\n\n\n\n History suggests that innovations \u2014 and investment opportunities \u2014 will continue irrespective of who wins a presidential election. The period since 2008, for instance, has included Democratic and Republican presidents. Many innovations were introduced during this time including 3D printing, cloud computing, gene editing, and virtual meeting software.<\/p>\n\n\n\n —<\/p>\n\n\n\n Originally Posted October 1, 2024 <\/p>\n\n\n\nInvesting and politics don\u2019t mix<\/h2>\n\n\n\n
Staying fully invested vs. choosing political sides<\/h3>\n\n\n\n
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<\/figure>\n\n\n\nUS economy doesn\u2019t radically change<\/h2>\n\n\n\n
Neither party is fiscally responsible<\/h2>\n\n\n\n
Monetary policy matters more<\/h2>\n\n\n\n
President\u2019s popularity doesn\u2019t matter<\/h2>\n\n\n\n
Markets performed best when presidents weren\u2019t so popular<\/h3>\n\n\n\n
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<\/figure>\n\n\n\nInvestment opportunities continue despite the president<\/h2>\n\n\n\n