Relax, The Election is Nearly Over - WT Wealth Management November 2024 Special Market Update

The run up to the U.S. Presidential Election can be a stressful, overwhelming and exhausting experience. Anyone who has listened to the radio, watched a television commercial, or even driven down a local neighborhood street has probably been bombarded with political advertisements from both sides of the fence. While the list of issues is long and divisive, we at WT Wealth Management expect the campaigns of Democratic nominee Kamala Harris and Republican Donald Trump to focus their efforts on what has been, and continues to be, the number one most important issue for voters – the economy.

Over the next few days, we anticipate each party will offer up dramatic rhetoric about each candidate’s track record on economic issues. While a host of other issues can influence voters, when it comes to filling out their ballots, most voters are concerned about their individual financial position over the vast array of social and foreign policy issues the candidates differ upon.

As of October 10th, 2024, the S&P 500 has gained 50% since President Joe Biden and Vice President Kamala Harris were inaugurated on January 20, 2021. By any measure, it is a sizable rise over the nearly four year term, especially given that the S&P 500 lost 19% in 2022 when it was hurt by the Federal Reserve’s push to raise interest rates in order to fight inflation.

While 50% is impressive, it is less than the 53% at the same stage in President Trump’s term, as shown in the table below. Trump’s final year in office was marked by stocks diving as uncertainty related to the COVID-19 pandemic took hold, but the S&P was back at new highs by August 2020.

Table 1: S&P 500 Returns during U.S. Presidential Terms in the 21st Century

Presidents	Inauguration Date	S&P 500 Level	Date after 3 ^3/4 years in office	S&P 500 Level	Performance
George W. Bush (R)	1/20/2001	1,342.54	10/10/2004	1,122.14	-16.42%
George W. Bush (R)	1/20/2005	1,175.41	10/10/2008	899.22	-23.50%
Barack Obama (D)	1/20/2009	805.22	10/10/2012	1,432.56	77.91%
Barack Obama (D)	1/20/2013	1,485.98	10/10/2016	2,136.73	43.79%
Donald Trump (R)	1/20/2017	2,271.31	10/11/2020	3,477.13	53.09%
Joe Biden (D)	1/20/2021	3,851.85	10/10/2024	5,780.05	50.06%

https://www.marketwatch.com/story/heres-how-stocks-have-performed-under-biden-and-harris-vs-under-trump-1339db74

Combining the two Presidential terms, which could not be more different from a policy standpoint, demonstrates the power of sticking to an investment plan regardless of the party in power. From November 1st, 2016 to October 10th, 2024 the S&P 500 Index is up a staggering 172% with an average annual total return of 15.4%.

Regardless of who wins the election, with the unprecedent division within the country, it stands that nearly half of the American people will be upset that their candidate did not win. The equity markets may have some flash reactions to the election results as it did in 2016 when, on election night, Dow Jones Industrial Average futures were down 800 points. ⁽¹⁾

As we have stated dozens of times, the financial markets tend to embrace the exchange of the “unknown” for the “known” and use the new information to price investments accordingly.

As an example, traditional energy and green energy could be the big winners and losers this election cycle depending on who wins. The common belief is that traditional energy would rally under a Trump “drill baby drill” administration while green energy would rally under a Harris “greener” administration.

Ultimately, the consumer accounts for 68% of the U.S. economy. If Americans are employed, they consistently spend. If there are shortfalls, they appear willing to borrow (Consumer Debt Outstanding has crested $5.0T). ⁽²⁾ The Federal Reserve has begun an easing cycle (cutting interest rates 0.50% in September) that has put the economy on solid footing for 2025 and after that we’ll have to wait and see. One thing that can be agreed, the eventual winner is being handed a very good economic environment and that’s never a bad thing for the stock market.

SOURCES

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