Any veteran financial advisor will tell you that the months before a presidential election is a time of great angst for many of their clients. When a long-term investment or insurance decision should be made, we’ll hear things like, “Yea, that makes sense, but I just want to see what happens with the election first.”
This sentiment has intensified every four years since I’ve been in this business. At this point, polarized emotion is at a fever pitch. So I’m going to ask you a question and please be honest with your answer: Its Inauguration Day Wednesday, January 20th, 2021 and the candidate you voted (hoped, begged, prayed, etc..) for, IS NOT being sworn in as the POTUS. At this point, would you be willing to put, let’s say, an extra $100,000 in the stock market?
If you answered, “Not only will I not put an extra $100,000 in the market, I’m thinking about moving all of my money out of the market until things get better”, then I thank you for your honesty. Although presidential elections lead to a lot of emotional financial decisions, it’s pretty apparent that the markets are going to return what they’re going to return, regardless of who the president is.
The following is a list of Presidents who have been in office during my years as an advisor, along with the overall gains or losses in the S and P 500 during their term:
Bill Clinton.. +211%
George W. Bush..-39.5%
Barack Obama.. +175.9%
Donald Trump.. +47.6%
At first glance, this disproves the theory. Did George W. Bush make a bunch of bad decisions that made the stock market go down? Bush’s tenure started with the Tech Bubble bursting and 9/11. It ended with the Great Recession. All three of these events would have happened no matter who was sitting in the Oval Office. On the flip side, should Clinton and Obama be praised for their market gains? Both began their terms in recessions, with low market values. And neither had to deal with a 9/11, Coronavirus, or other black swan event during their 8 year tenures.
By the way, even if you “picked the wrong president” and put that $100,000 in the S and P on Bush’s Inauguration Day, you would still have around $184,000 today. So stay invested when your candidate is on the wrong side of the electoral college tally. At the very least, your money won’t be as depressed as you are.