Recently, the media has been talking about how investors can play the presidential election. There have been several articles and opinion pieces about what changes to make to a portfolio if Trump or Harris wins. In that spirit, let’s look at how you can play the election of 2024.
Playing Stock Sectors
Since presidents and administrations have favorite policies, it seems like certain sectors may benefit more than others the sectors. But it isn’t that straightforward.
For example, historically, energy policies have been favorable under Republicans, and more restrictive under Democrats. But the energy sector lost 16% during Trump’s tenure and went up 47% under Biden.1 Surprising!
This illustrates that even when we get the policy right, we don’t know how the markets will respond.
Playing the Stock Market
Should we play the overall stock market? Famed hedge fund manager, John Paulsen, plans to pull out of stocks if Harris wins.2 Is this wise? Should you do the same? History is very clear on this.
- In the past 70 years if you had started with $1,000 and invested only when a Republican was president, you would have $27,400.
- If you had invested only when a Democrat was president, you would have $61,800.
- But if you were apolitical, and remained invested throughout, you would have over $1.6MM.3
Investing based on political outcomes can be very costly.
Playing the Election of 2024
It’s pretty clear that we should choose to not “play” the election. Leave that to the speculators. Companies have a history of generating earnings growth irrespective of president and policies, and stock markets historically follow earnings. Remaining disciplined to your plan provides the best chance to achieving your goals.
– Jonathan
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.
1. Source: Morningstar, Inc. as of 3/31/2024. Energy represented by the S&P 500 Energy sector index. An index cannot be invested directly into. Trump time period 11/9/2016 – 11/3/2020. Biden time period 11/4/2020 – 3/31/2024. For illustration purposes only. Past performance does not indicate nor guarantee future results.
2. As reported on FoxBusiness Sept 17, 2024
3. Source: Bespoke, Bloomberg. Investing time period from 1/20/1953 to 6/30/2024. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly. Past performance is no guarantee of future results.