Does Wall Street care who is President?

In a word, No!  We frequently discuss what the election will mean to the stock market.  While there may be short-term volatility due to a possible contested election and higher taxes on parts of the electorate if Joe Biden is elected, history says neither of these two events are likely to have a big impact on the markets over the next four years.

Forbes ran a piece in July of this year that detailed the stock market returns for every president back to Harry Truman.  Here are the results:

The business cycle, or where we are between expansion and contraction, has more to do with stock market returns than just about everything else.  This is because the business cycle impacts company profit growth potential over the next couple of years.  In addition, the stage of the business cycle usually impacts the prevailing interest rate environment which typically translates to stock returns.  When rates are low or dropping, the market goes up.  When rates are high or rising, the market is flat to down.  Each Presidency has its share of challenges from the Vietnam War to the Great Recession and currently, the coronavirus pandemic. Generally speaking, challenges come and go and the market over time marches upward. 

Speaking of upward, the  Shiller P/E ratio and the “Buffett Indicator” both continue to suggest the market is overvalued compared to historical norms. For perspective, the Buffet Indicator is at 180%, continuing at an all-time high. What to do?  Buy and hold.  Since the market goes up over time, it’s best to forget about the ups and downs and stay invested. If the US economy continues to grow, the market will continue to rise.

If you have any questions, please feel free to reach out to us.  We are in the office full-time at 513-554-1472 to answer your calls or setup a Zoom video conference.  And of course, you are welcome to email us at any time.

Brian Kellett, brian@kellettschaffner.com. Phone 513-312-6067

Jared Kline, jared@kellettschaffner.com. Phone 513-768-2238