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The President and Your Portfolio

When it comes to politics, elections produce winners and losers.

When it comes to investing, the race is clear. The winners, by a landslide, have been those who remained fully invested and fought off the desire to tinker with their portfolios, especially when the “wrong” person sits in the White House or runs one of the chambers of Congress.

In case you are nervous about your political party losing in the upcoming election, and what that could mean to your investment portfolio, consider the following data.

Since 1929, only three presidents – out of 15 in total – have seen the stock market lower from the day they won the election to the day the next president was elected.

We can also look at the historical record for whether one political party or the other shellacks investor returns. We have reliable data going back to the late 1940s, when the S&P 500, a widely used stock market benchmark, was created. Since that time, when Republicans held the White House and Congress, the average rate of return on the market has been 12.9%. When Democrats held the White House and Congress, the average rate of return has been 9.8%. And when the White House and Congress were divided between the parties, the average rate of return has been 7.8%.

No matter how you cut the data, the stock market has done reasonably well under each of these scenarios. It has not been cataclysmic from an investing standpoint to have Democrats or Republicans in the White House or in control of Congress.

So, if you think a Trump reelection or a Biden takeover is cause for concern when it comes to your portfolio, you may want to think again. History would prove otherwise.

I’m not saying the president of the United States has no bearing on the stock market. That is not true. But he – or someday, she – is one of hundreds of variables that could impact your portfolio.

The president gets far too much credit and far too much blame for what happens in the stock market and the economy. It is a powerful position but not an almighty one. Congress matters. The Supreme Court matters. The American people matter. And most of all, when it comes to investing in the stock market, the companies in which you invest matter.

Do not forget that last part.

Whether a Democrat or a Republican wins the presidential election on November 3 – or whenever the election is ultimately finalized – the companies in which you invest, and their employees, will still be working on your behalf. They will still show up early in the morning and leave late in the evening, spending their days trying to invent new products, implement better services, and find ways to cut costs to reap bigger profits.

We have designed a wonderful economic system that unleashes the best in people. The market system is remarkably efficient at rewarding activity that creates value. As long as the president doesn’t get in the way of that – which would be nearly impossible given our country’s checks and balances on power – our economy will continue to flourish, benefiting investors in the process.

History has rewarded those who have remained invested throughout time and across presidential terms.

No matter who wins the presidential election in a few short weeks, life will carry on. Companies across America will continue to find ways to do things better, faster, and cheaper. They will employ the best people to tackle the toughest problems. And they will find ways to offer more value to more customers.

That’s a recipe for success when it comes to investing. Don’t let your political persuasions or a president get in the way of enjoying a piece of that success.

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