I probably should not comment on the election. I will likely annoy someone, maybe everyone! But several clients have either asked me about their investments with regard to the election or commented about it. Some of them are worried that Trump will win, and others are worried that Harris will win. Meanwhile, the stock market bumps along at close to all-time highs, seemingly unconcerned about either prospect.
I agree with the stock market. Presidential elections, as it appears to me, barely matter to your investments. The stock market goes up under Democrats, and it also goes up under Republicans.
Looking back over the past four decades, we have Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, Barack Obama, Donald Trump, and Joe Biden. Under which of these presidencies did the stock market do well? Under all of them! They all get decent or good marks from me for their handling of the economy. I think that these years represent a golden era of prosperity with generally low inflation which we under-appreciate.
The stock market declined during the eight years of the presidency of George W. Bush. I cut him some slack, because he inherited both the dot com crash of 2001, and the financial panic of 2008 - 2009. To say that he had bad timing puts it mildly. Nothing in his handling of fiscal policy or taxes made him a worse steward than the others, in my view, and the stock market ultimately recovered from both of those panics.
Presidential elections don't matter much to the market in part because the executive and the congress (from both parties) have largely abdicated responsibility for the management of our economy. They stopped worrying long ago about balancing our budget, have run up stupendous deficits, and have saddled our country with $36 trillion in national debt. We can debate the merits of such policies for our country, but they are unambiguously good for stocks. Extraordinary special mention goes to President Bill Clinton, who broke that mold, who balanced the budget for four of his eight years in office, overcoming opposition from a Republican Congress, and who reduced our national debt, when measured as a percentage of GDP. Interest rates plunged and the stock market soared during this time. No other president on my list comes remotely close to this accomplishment.
When we need to apply the brakes, presidents and congresses rely on the Federal Reserve, which acts as fireman when the blaze really gets out of control. I'm grateful to the Federal Reserve. It has done a very difficult job of controlling inflation phenomenally well, a few errors in the last few years notwithstanding, and deserves our appreciation far more than it receives.
So, fret about the presidential election as much as you like, but fret not about your investments any more than usual. I can't predict who will win, or the short term direction of the market, but I think things will go generally well for stocks no matter what happens.
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