The Elephant (or Donkey) in the Room

You’ve probably heard, but there’s an election coming up next month.  The stakes are high as this has been billed, once again, as “the most important election of our lives.”  Indeed, there are many issues to address for the next presidential term and the new congress.  For investors, the stakes can seem even higher given their exposure to companies that may be affected by policies enacted by those we elect.  Fortunately, we can all breathe easier by taking a closer look at history.

In the following graphic, we can see a comparison of all the President’s approval ratings going back to President Kennedy with the growth of a hypothetical investment of $100,000 in US stocks.  One might hypothesize that the stock market would perform its best when the highest number of people are happy with a President’s job performance.  However, the data shows that the market has performed best when the approval rating is between 35% and 50%.

It turns out that the market doesn’t care if you like who’s president.  There are plenty of good and bad economic periods that have occurred on the watch of presidents of both parties.  The day after the election results are known, we will still all carry on with our lives, going to work to create the best products and services we can.  Progress still moves forward.  The President or any other elected official can’t force a company to operate at a loss.  For best results, I urge you to check your politics at the investment door.

 *Invesco, 2020 US Presidential Election