Presidential elections? Yes, and?

The Divided States of America

Today is the day. It is up to the American electorate to decide who will be the White House resident for the next four years. Will it be the current president? He has not been entire of impeccable behaviour for the last four years. Nor has his policy always received the full approval of his people. The last four years have been somewhat turbulent, to say the least. Or will it be the other candidate? Like the incumbent President, he has had his best years behind him and his life’s journey has never been entirely flawless. What is more important in these elections, however, is what the two candidates stand for. More than ever in history, the United States seems to be divided into two camps that are gripping each other’s throats. The mutual repugnance between the Republicans and the Democrats is so great that there is even talk of the Divided States of America.

Is this important for investors?

But how important are these elections now for investors? Every time elections are held in the United States, comparisons are made as to which party is better for the stock market. The policy of a president or his party in Congress naturally has an impact on the financial markets or certain sectors of the economy. It is very doubtful, however, whether the financial world is too concerned about the new occupant of the White House. It does matter to the man in the street and the mood in the world, but does it matter to the investor?

No, in fact, it does not

Assuming that the investor is only interested in the return on his assets, it does not really matter who becomes President of the United States over the next four years. That may sound a little crude, but a simple survey shows that investors among Democrats and Republicans were just as well — or badly — off in history. For example, the average annual return under a Republican president since 1900 has been 6.6% per annum. Let that be exactly the same for Democratic presidents. All the stories about Republicans who would be better for business and Democrats who scatter public money, in practice, it turns out that it makes no difference.

Trump and Obama

Another nice fact. The current President cannot be more different from his predecessor than one might imagine. But did that make any difference to the stock market? Under Obama, the technology and consumer durables sectors were the most profitable. Trump came and did things very differently, but what does it turn out to be? Technology and consumer durables are still the most profitable. And what turned out to be the worst sector to invest in under both presidents? Well, energy, that is. Would it really make any difference who will soon be the new president? For society, but for investors?

Blue Wave

At the time of writing, the fair seems to be in the process of a new rally. Tension about the approaching election results? Where then? Investors are also seeing the latest polls. For instance, Biden’s lead over Trump is much bigger than Clinton’s lead over Trump four years ago. And much more importantly, Biden is clearly ahead in a number of swing states. Even the Republican stronghold of Texas is faltering. However, investors are not only considering a Democrat in the White House, but also a Democratic majority in both the House of Representatives and the Senate. A so-called Blue Wave. That would pave the way for a very ambitious programme of support for the economy. In addition, a clear democratic victory would reduce post-election tensions over the outcome.

Too much attention

However, as has already been shown above, in the long term, it makes no difference to investors who become the new occupant of the White House. All the movements over the last few weeks have been short-term cat purr. This is important for traders, but long-term investors should shrug their shoulders about it. Measured over a full four-year period, it really does not matter who becomes President. Perhaps that is why too much attention is paid to it in the financial press. But I have to admit, I am now taking part in it myself.

Chelton Wealth — Quanify GmbH is an independent asset manager. We serve private individuals, institutions, foundations and entrepreneurs with independent and personal asset management. If you would also like to be kept up to date with the latest news, please sign up here for our weekly newsletter. Would you like to know more about the possibilities? Then request a callback. We will contact you without obligation.

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Robert J. Teuwissen

Robert J. Teuwissen

Financial Services Entrepreneur

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