Which Presidential Candidate is Better for Wall Street?

In just over a month, voters will decide the country's future. While not all presidential actions affect Wall Street, the economic policies of the incoming administration can significantly impact the stock market. Over the past two terms, stocks have performed well. During Donald Trump's presidency, the Dow Jones, S&P 500, and Nasdaq Composite saw gains of 56%, 67%, and 138%, respectively. Under Joe Biden, these indices rose by 36%, 50%, and 36% as of October 10, 2024. The incoming president will face a tough challenge. The stock market is historically expensive. The S&P 500's Shiller P/E ratio, which measures value over a decade, is around 37. This is the third-highest reading in a bull market since 1871. History shows that when this ratio is high, stocks can lose up to 89% of their value.

Other concerns include the longest yield-curve inversion in history and a decline in the U.S. money supply, both signs of potential economic trouble. Looking back at history, Democratic presidents have generally been better for stocks. Since 1926, the S&P 500 has seen an average annual return of 14.78% under Democratic presidents, compared to 9.32% under Republicans. However, investing success isn't just about which party is in power. Time is the best ally for investors. Over 20-year periods, the S&P 500 has always generated positive returns, regardless of the political climate.

Actions