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But What If He Wins The Election?

June 04, 2024

Blog:  But What If He Wins The Election?


Presidential election season is upon us so, naturally, the media has people in a frenzy worrying about what will happen to their portfolios.  People from both sides of the political aisle are warning of dire consequences and claiming it will be horrible for the markets if “the other guy” wins.  History suggests otherwise.

For example, in 2016, pundits on the Left claimed that if Donald Trump became president, markets would crash.  In fact, from January 2017 (when Trump took office) to January 2021 (when Trump left office), the S&P 500 returned an average of 15.8%.1

Of course, right on cue, in 2020 the pundits on the Right claimed that if Joe Biden became president, markets would crash.  In fact, from January 2021 (when Biden took office) through May 2024, the S&P 500 returned an average of 11.5%.2   The comparison isn’t perfect, however, since Biden’s term isn’t complete and there could very well be a common post-election rally.

Regardless, an average annual return of either 15.8% or 11.5% is hardly a crash.  I would accept those annual returns in any year.

To be sure, whoever becomes the next president has serious issues to address.  The deficit and national debt have been rising for more than 20 years and our entitlement programs are facing shortages, just to name two.

Betting on America

But this is nothing new.  America has faced crisis after crisis in the past, yet the markets have continued to rise.  During the Great Financial Crisis in 2008, the S&P 500 sunk to a low of 677 then rose again.  During the COVID pandemic in 2020, the S&P 500 fell to 2,237, causing another panic.  Yet today it sits above 5,000.  Why is this the case?

The S&P 500 is comprised of the largest, most innovative, and resilient companies in the world.  These companies have grown because they have been able to adapt to and thrive through different administrations, subsequent policy changes, and various crises.  We invest in these companies because we have seen, repeatedly, that the best-run companies overcome obstacles and rise to new heights and higher earnings.  To think this won’t be the case in the future is ignoring the history of American Capitalism.  Or, as Warren Buffett put it during the Great Financial Crisis, “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”

You can expect the noise surrounding the presidential election to increase over the next few months and, if you listen to it, your anxiety will increase with it.  My advice (as usual) is to try to block out the media noise and follow your plan.  

Of course, if you have any questions please feel free to contact me.

Regards,

Joe



1,2 With dividends reinvested.  Source: https://dqydj.com/sp-500-return-calculator/

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  

Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Investing includes risks, including fluctuating prices and loss of principal.

References to the S&P 500 Index are for illustration purposes only.  You cannot invest directly in an index.