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Trump vs. Harris: What the Election Means for Stocks
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A critical lesson savvy investors understand is that political leanings, bias, and opinions need to be left at the door when it comes to making money in the long run on Wall Street. Don’t just take it from me; take it from the world’s greatest value investor – Warren Buffett. In a 1994 quote, “The Oracle of Omaha” underscored the importance of ignoring political and economic distractions:
“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bull yields fluctuating between 2.8% and 17.4%.
A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises similar will have little effect on our long-term results.”
Does the Market do Better Under a Republican or Democratic President?
Using data dating back to the 1950s, the binary answer is Democrats. However, there are few binary answers to questions on Wall Street, and presidential politics is no different. Historical data proves that the U.S. stock market trends up over time, regardless of who is in office. Though you would have outperformed Republican presidential periods if you only had the choice to invest in one party or the other, the right move by far was to be invested throughout the presidencies of both major U.S. political parties.
In other words, investors need to come to terms with the fact that the U.S. president has less of an impact on the market than the media and the candidates themselves would have you believe. All you have to do to prove this fact is to consult a long-term chart of the S&P 500 index.
Image Source: Zacks Investment Research
How Does Gridlock Factor Impact Stocks?
In a unified government (defined as one party holding power of the presidency, the House of Representatives, and the Senate), Republicans enjoy a slight edge over Democrats (using data from 1926-2023). The best outcome is a divided government with a Democratic President, but again, stocks tend to move higher over the long-run regardless of who’s in power.
Image Source: retirmentresearcher.com
Market Volatility Pre-Election is Normal
Though we have underscored the fact that stocks move higher in the long-term, historical seasonality trends illustrate how markets dislike uncertainty in the short-term. On average, stocks are lower in the back half of September and October during election years.
Image Source: Seasonax
Stocks to Watch Post-Election
Bitcoin, Crypto, and the Election
Like the equity market, Bitcoin has performed well under both Republicans and Democrats. However, you would probably rather see a Donald Trump presidency if you own Bitcoin or crypto proxies like the iShares Bitcoin ETF ((IBIT) ) or Coinbase ((COIN - Free Report) ). While Kamala Harris has remained relatively reserved on the crypto topic, Trump has evolved on the industry and has gone out of his way to embrace it. Former President Donald Trump went out of his way to speak at the Bitcoin Conference earlier this year and embraced crypto while vowing to “Appoint an SEC chair who will build the future, not block the future.”
From a regulatory standpoint, Trump is clearly the optimal choice for the crypto crowd. Still, neither party has shown the ability or intention of controlling debt, which should put a bid under assets like Bitcoin over the next few years.
Image Source: CBO
What Does the Election Mean for Clean Energy Stocks?
Harris and the Democrats have the advantage regarding clean energy stocks. The Biden-Harris administration passed the Clean Energy for America Act and the Inflation Reduction Act, providing incentives for clean energy companies like First Solar ((FSLR - Free Report) ) and Tesla ((TSLA - Free Report) ). Meanwhile, Donald Trump has promised to end incentives for EVs and other clean energy segments.
How will Immigration Policy Impact Stocks?
While Kamala Harris appears to be evolving and moving more to the middle on immigration, the topic is a crucial pillar for Trump. A stock to watch closely is GEO Group ((GEO - Free Report) ), which runs immigration detention facilities. Harris once promised a voter that she would shut down immigration detention facilities“on day one.”
Bottom Line
Historical data teaches us that Presidential politics have less to do with stock market returns than most voters would think. However, by studying the numbers, investors can make more informed decisions, regardless of the outcome in November.
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Trump vs. Harris: What the Election Means for Stocks
A critical lesson savvy investors understand is that political leanings, bias, and opinions need to be left at the door when it comes to making money in the long run on Wall Street. Don’t just take it from me; take it from the world’s greatest value investor – Warren Buffett. In a 1994 quote, “The Oracle of Omaha” underscored the importance of ignoring political and economic distractions:
“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bull yields fluctuating between 2.8% and 17.4%.
A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises similar will have little effect on our long-term results.”
Does the Market do Better Under a Republican or Democratic President?
Using data dating back to the 1950s, the binary answer is Democrats. However, there are few binary answers to questions on Wall Street, and presidential politics is no different. Historical data proves that the U.S. stock market trends up over time, regardless of who is in office. Though you would have outperformed Republican presidential periods if you only had the choice to invest in one party or the other, the right move by far was to be invested throughout the presidencies of both major U.S. political parties.
Image Source: Bespoke Investment Group, Carson Investment Research, FactSet
In other words, investors need to come to terms with the fact that the U.S. president has less of an impact on the market than the media and the candidates themselves would have you believe. All you have to do to prove this fact is to consult a long-term chart of the S&P 500 index.
Image Source: Zacks Investment Research
How Does Gridlock Factor Impact Stocks?
In a unified government (defined as one party holding power of the presidency, the House of Representatives, and the Senate), Republicans enjoy a slight edge over Democrats (using data from 1926-2023). The best outcome is a divided government with a Democratic President, but again, stocks tend to move higher over the long-run regardless of who’s in power.
Image Source: retirmentresearcher.com
Market Volatility Pre-Election is Normal
Though we have underscored the fact that stocks move higher in the long-term, historical seasonality trends illustrate how markets dislike uncertainty in the short-term. On average, stocks are lower in the back half of September and October during election years.
Image Source: Seasonax
Stocks to Watch Post-Election
Bitcoin, Crypto, and the Election
Like the equity market, Bitcoin has performed well under both Republicans and Democrats. However, you would probably rather see a Donald Trump presidency if you own Bitcoin or crypto proxies like the iShares Bitcoin ETF ((IBIT) ) or Coinbase ((COIN - Free Report) ). While Kamala Harris has remained relatively reserved on the crypto topic, Trump has evolved on the industry and has gone out of his way to embrace it. Former President Donald Trump went out of his way to speak at the Bitcoin Conference earlier this year and embraced crypto while vowing to “Appoint an SEC chair who will build the future, not block the future.”
From a regulatory standpoint, Trump is clearly the optimal choice for the crypto crowd. Still, neither party has shown the ability or intention of controlling debt, which should put a bid under assets like Bitcoin over the next few years.
Image Source: CBO
What Does the Election Mean for Clean Energy Stocks?
Harris and the Democrats have the advantage regarding clean energy stocks. The Biden-Harris administration passed the Clean Energy for America Act and the Inflation Reduction Act, providing incentives for clean energy companies like First Solar ((FSLR - Free Report) ) and Tesla ((TSLA - Free Report) ). Meanwhile, Donald Trump has promised to end incentives for EVs and other clean energy segments.
How will Immigration Policy Impact Stocks?
While Kamala Harris appears to be evolving and moving more to the middle on immigration, the topic is a crucial pillar for Trump. A stock to watch closely is GEO Group ((GEO - Free Report) ), which runs immigration detention facilities. Harris once promised a voter that she would shut down immigration detention facilities“on day one.”
Bottom Line
Historical data teaches us that Presidential politics have less to do with stock market returns than most voters would think. However, by studying the numbers, investors can make more informed decisions, regardless of the outcome in November.