Don’t ascribe meaning where there is none, don’t confuse correlation with causation. These are standard “wise person” sayings that we have heard hundreds of times. They are maxims to live by, and yet when it comes to politics and stock market returns we are often taken in by talking points rather than facts. With the election looming once again, we thought it would be good to check in on what investing in an election year entails.
Looking at the chart above, it is easy to see the US presidential winner in the election year and attribute some meaning to what the stock market really likes from a politician. But what is the truth? We have showed charts in the past about the de minimis difference when each party controls the highest office in our land.
Does anybody think that the 2008 stock market returns had anything to do with Obama’s election? Or that 2000 returns were because Bush won the office? The election results were not even known before November. We know the reality. Secular forces are more powerful than any politician. The negative 2000 returns were due to the tech crash. 2008 was due to the housing and financial crisis, not because one man from a particular party was elected to office, no matter how powerful that person or party was.
The 1990s were not a 10-year bull market because 8 of those years were presided over by Bill; they were a 10-year bull market because the United States was becoming a global hegemon, and because of a technology boom.
Businesses in the United States are very good at making money and creating wealth in difficult situations. We are blessed to live in prosperous times in a prosperous country. From a market positioning perspective do not read too much into the party in control of the White House.