This year’s presidential election is coming quickly on Nov. 5, 2024 (you may be familiar with the two candidates). Elections tend to bring out passion and fear in our population. Right now, citizens are polarized on candidates and the strong feelings are leading to trepidation about the impact of either candidate on our economy.
Historically, neither Republicans nor Democrats have been better for the economy or stock markets. Stocks have trended up regardless of who won the White House.
Election season tends to be volatile, but markets have bounced back strongly afterward. On average, U.S. stocks have returned 11.3% in the 12 months following the elections. The S&P 500 Index had negative returns in only two of the last 20 election years: 2000 (tech bubble burst) and 2008 (Great Recession).
The impacts on the stock market are due to policy changes, sector sensitivity to potential changes in regulation and government contracts, and international relations.
Donald Trump’s previous presidency saw corporate and individual tax reductions, deregulation, tariffs and tweets. We saw positive stock market impacts from tax cuts and deregulation as well as volatility due to trade tensions, tweets and geopolitical uncertainty. Current polls put Trump at a slight lead but, overall, it is a tossup, and markets are concerned about Trumps policy initiatives, which are inflationary. He has plans for devaluing the dollar, slowing immigration and eliminating the independence of the Federal Reserve. The Fed makes monetary decisions without federal government approval, which is vital to keeping our economy on an even keel.
A second Biden administration would see continued infrastructure spending and increased social services spending. President Biden proposes increased taxes on corporations and high-income individuals to pay for further expenses. A big goal for Biden is renewable energy and fighting climate change. Regulation would most likely increase under Biden for healthcare, finance and technology.
Recently, generative AI caused instances of manipulated or wholly generated content. The problem is technology is getting smarter and more realistic, creating concerns about false images, deceiving voters into believing untruths about candidates and manipulating the election.
The election of either candidate will affect businesses differently, and possibly lead to certain sectors doing better than others, depending on how they implement their agendas. Overall, growth of productivity through artificial intelligence (AI) is a big game changer for companies no matter who is elected.
Most of the data for the “Election Fears” section comes from Capital Groups’ “Guide to Investing in an Election Year” 2024 edition. All investing is subject to risk, including possible loss of the money you invest. Nothing in this article should be construed as investment or retirement advice. Always consult with a professional advisor and consider your risk tolerance and time to invest when making investment decisions. Review your personal situation with a professional before planning any gifting or estate planning.
