First of all, I do care who wins the election. Anyone who knows me knows that. In fact, anyone who knows me knows that I have deep philosophic convictions about the role of government and its proper role in our lives. These convictions also happened to be grounded in a concept largely foreign to most politicians, and that concept is… principles.
Yet with a provocative headline such as the one I pronounced, I know I had better come correct with an explanation, so here it goes.
You see, when I say I don’t care who wins the election, I am speaking in terms of investing in the markets.
The reason I say that is because, despite all of the chatter out there right now about which party and which candidate will be better for stocks, the answer is that markets really don’t care who is in charge — because opportunity is always out there despite who holds political power.
I wrote in detail about this situation in the Aug. 7 issue of this publication, but today, it makes more sense than ever, as we now are less than three weeks away from Election Day.
Oh, and just to update you on the metric that I think is very important to watch here, according to the betting markets (where people are placing real money wagers on the outcome), Former President Trump now leads Vice President Kamala Harris on the betting prediction platform Polymarket, with odds of 59.7% to 40.2%.
Polymarket also has 82% odds of Republicans taking the Senate, and a 55% chance that Democrats take the House of Representatives.
Then there is the prediction platform PredictIt, which also shows Mr. Trump in the lead, with contracts for a Trump election win trading for 55 cents, while contracts for a Harris win are 50 cents. So, while national polls have Harris in the lead at 45% to Trump’s 42%, as we all know, national polls are both flawed and rather insignificant, as it’s the swing state polls, and results, that really matter.
So, back to why I don’t care who wins, in terms of investing in markets, consider the following data provided to me by my friends at Sevens Report Research. Their work revealed some interesting facts about the markets over the past nearly eight years and through most of the last two administrations.
A look at how markets performed during the Trump administration versus the Biden administration provides us with some kind of baseline when assessing what might take place in markets if Trump is re-elected or if Harris wins the presidency. The one caveat here when assessing the following data is that during the Trump administration, we had the COVID-19 pandemic and the economic response to it. That response, which included a flood of easy money from both the Federal Reserve and the Treasury, skewed market results (to the upside) in 2020.
So, how did the major market segments perform last time during each respective administration? The table below tells us just that (data through August 2024).
As you can see, from January 20, 2017, when President Trump took office through January 20, 2021, all but two of the above S&P 500 sectors show a distinct advantage in favor of Trump over Biden.
If we back out the skewed performance in markets during the COVID-19 pandemic, then we still get outperformance for Trump versus Biden, although as you can see in the far-right column of our table, that outperformance is not nearly to the same degree as it was when you include the pandemic period (remember that despite the pandemic, markets enjoyed a stellar 2020).
One very interesting thing to note here is that when it comes to the performance of the broad domestic equity market, as measured by the SPDR S&P 500 ETF (SPY), we see a virtual tie in performance over the periods that don’t include COVID-19. So, Trump outpaced Biden by 50.74% to 49.59%.
The bottom line here is that, based on the history of past performance, Trump is likely to be only slightly better for equity markets than Harris. However, keep in mind that Harris won’t have the same policy agenda as Biden, and Trump 2.0 isn’t likely to have the exact same policies as he did in his first term.
Finally, the real reason why, from a market perspective, I don’t care who wins is because I am a thinking agent capable of directing my money (and my subscribers’ money) where it will be treated best. If tech is outpacing the market, then we will embrace tech. If energy and utilities are leading the charge, then we will be right there with them.
It is because you, as a thinking agent capable of self-directed action, have the free choice to point your money to where it will be treated best, that you also shouldn’t care (again, from an investment perspective) who wins the election.
I know I am going to make money for myself and my subscribers no matter who is in office, because I have the freedom to make good decisions and the sound critical thinking and experience to know where and when to do just that.
So, don’t fear the election outcome — profit from it!
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When Washington Sleeps
“When Washington sleeps, the economy grows.”
–William Rees-Mogg
Divided government is usually the best scenario for markets, because the less active lawmakers are, the more the real work of the American economy can proceed unencumbered. So, let’s hope for divided government this election season as well, as less is more when it comes to new rules and regulations handed down from on high.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
In the name of the best within us,
Jim Woods
