Is the Biden administration good for the market or bad for the market? That seems to be a question many of our clients are asking. In addition to the executive actions President Biden signed last week, the Biden administration has ambitious plans for the first 100 days in office, many of which will roll back key policies established by his predecessor. Some people are concerned these changes will quash innovation and growth which could result in a difficult period for the stock market. Others believe Biden’s economic stimulus plan will combine massive spending and low interest rates providing just the catalyst the stock market needs.
We are besieged every day from the media with information about our political and economic future. Regardless of which side you fall, as investors, it is important to look beyond the political noise, think about your personal financial goals and keep in regular contact with your fiduciary financial planner. It is our job to keep you focused on what matters, using unbiased and educated advice to keep you on track and unswayed when it comes to preparing your portfolio for any potential changes in political leadership and policies.
While we consider many economic indicators and factors, while preparing your portfolio, political party and their corresponding policies have had little impact on the overall stock market historically. Reviewing the data indicates:
- There is no systematic correlation associated with the party who wins an election and the returns of the market.
- On average, market returns have been positive both in election years and the subsequent year after any election.
- Market expectations associated with the election and any other future outcomes are embedded in security prices.
Again, when we look at the data, we were surprised to find little correlation between the party in office and market returns.
Annualized Returns During Presidential Terms
S&P 500 Index: 1929–2019
And the adage continues to be true. That Long-Term Investors are rewarded regardless of who is in office.
Growth of a Dollar Invested in the S&P 500: January 1926–December 2019
The bottom line in all of this is that we maintain a strategic and systematic position with the portfolios we manage based upon the science of investing. If current events have you worried about the future of your portfolio, please contact us so we can provide important insights into whether your asset allocation should be readjusted, and we can review any contingency plans we have put in place to prepare you for success.