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How Do Presidents Impact the Stock Market? · Retirement Answers

• 0:02
  Jacob: There will be periods absolutely where things are slower and things are not good. But long term, it will always work out if we invest in those companies that are providing goods and services to us. Us. So the four most dangerous words in investing are it's different this time. Welcome to Retirement Answers, a podcast built to answer your most pressing retirement questions.
• 0:26
  If If you're someone who's either thinking about retirement or already in retirement, well, you're in the right place. Hey there. My name is Jacob Duke, and each week, I'll be walking through different tips and strategies to help you succeed in retirement. So let's go ahead and get started with today's show. Hey friends, welcome back to another episode of Retirement Answers.
• 0:47
  My name's Jacob Duke. I'm your host as always. By the title of today's episode, you can probably see that we're gonna be talking about how presidents might impact the stock market and more specifically, how stock markets react or are impacted during election years since we are an election year in 2024. So I wanted to walk through this and I'd rather give more data than I would opinion. And so obviously there are some thoughts and opinions there that all of us have.
• 1:11
  We all have different biases that lean one way or another regarding who is or isn't the best for stock market returns. But we're going to see here just a second that maybe the data suggests something different. And so I wanted to walk through that with you and just kind of give you hopefully some peace of mind or give you some education, as you head into this election year. And hopefully you won't make any drastic changes or big decisions based on who the president is or isn't. So, I see this all the time with mistakes.
• 1:38
  I see people say, well, if this person's the president, I'm not gonna invest because only bad things can happen if the case. Or if this person's the president, I'm gonna invest all my money because they obviously can only do good things because they're in the right political party. So the reality is we have opinions and biases across the board, every single one of us, and that's totally fine. We have the right to have those. The problem comes in whenever we decide to let those biases impact our investment decisions.
• 2:05
  So I wanted to kind of share some data here on on what this looks like going back to to Jimmy Carter and how each president has done ever since then. This is gonna give us four Democrats and four Republicans Republicans, to kinda evaluate and see, hey, how did each of them do, and is there any pattern there or not? But before we jump into kinda what each president has done in their annualized return during their time in office, I wanted to kinda look really quickly. If you're on YouTube, you can see this on the screen, but this data comes in from from DFA, Dimensional Fund Advisors, and it shows us what actually happens during the month of an election. So a lot of people think there's really big swings in those months of elections, either up or down, depending on who does get elected there in November.
• 2:46
  And, the data shows that it's really not much different. Whatever happens or is happening in the stock market is gonna continue happening. And we're gonna see that here on a different chart if you are on YouTube watching this. And by the way, if you're listening on the podcast, be sure to go listen on YouTube watch that there because there is a little bit more information for you to check out. We can see that there's really no pattern.
• 3:05
  There's no pattern, because, whatever month it is, the market's gonna keep doing what it's doing. And the thing that I wanted to show you if you are watching this is that to the right of the center line, you can see that there are more months with positive returns during election years. So during that election month, there are still more positive months than negative months, and there's still no pattern to say which party is better or worse during those months. So that's the first thing to kind of know is that just because it's an election month does not mean there's going to be a huge swing in the stock market. Now this is looking at a total US stock market, rather than just one index or another.
• 3:39
  So all 3,500 stocks that are in The US are being calculated here in these different returns. So that's a quick note is just because it's an election month, don't think there's gonna be a huge swing up or down. The data suggests that it's just gonna be a normal month, right? There's no reason to panic or go all in depending on who wins the presidency. So let's take a look at how these presidents have done.
• 4:00
  Going back to Jimmy Carter, we're gonna start with him and come all the way to today with Joe Biden. And so we got four Democrats and four Republicans over this timeframe. So if we go back to November 1976, whenever Jimmy Carter was elected, and we have his four year stretch of his term, if you had invested $100,000 in the day that he was elected, by the time his presidency ended, you would have had $173,000 So, this was an annualized return of 14.6%. Ronald Reagan, if you had invested during his eight year presidency, beginning at that and ending with, the end of his terms, if you put $100,000 in at the beginning of his presidency, you would come out the other side with $283,000, which is a 14% annualized return. George H.
• 4:46
  W. Bush, if you had invested $100,000 at the beginning of his presidency at the end of 1988, then you would come out the other side with 173,000, and he had a four year, presidency, so just one term. That is a 14.6 annualized return. Bill Clinton had two terms, which totaled eight years from 1992 until 2000. If you'd invested 100,000 at the time he was elected until he exited, that would have turned into $386,000 for an 18.4% annualized return during that time period.
• 5:20
  George W. Bush from 2000 all the way to 2008, he had two terms for a total of eight years. Your $100,000 would have lost money and gone down to $82,000 which equates a minus 2.5% annualized return. Barack Obama, who was president from 2008 to 2016, if you had invested $100,000 at the beginning of his presidency, it would have gone to $266,000 which is a 13% annualized return. Donald Trump, had a four year term, if you'd invested $100,000 at the beginning of his presidency, it would have been $176,000 by the end of it, which is a 15.8% return.
• 6:01
  And for Joe Biden, who has not had a full term yet, the data goes from the day he was elected in 2020 until March 2024, so the end of last month. If you invested $100,000 at the beginning of his presidency until last month, it would have gone to $162,000 which is an annualized return of 14.6 percent. So that's four Republicans and four Democrats. And just really quickly, I'm gonna run back through. We can see that it had 14.6%, fourteen, fourteen point six, 18.4, minus two and a half, 13%, 15.8%, and then 14.6 so far under Joe Biden.
• 6:39
  What you can see is that the stock market is positive. It doesn't matter who the president is. It doesn't matter when they started. Obviously, are times and periods of time whenever the market is down greatly, but there's really no pattern in terms of who is or isn't the president or whichever party is in power. There's not a pattern to say one is better than another for the stock market.
• 6:58
  So what has happened over this thirty, forty, fifty year period? We've had multiple wars. We've had terrorist attacks, nineeleven. We've had financial crises. We've had Y2K.
• 7:09
  We've had COVID. We've had so many other things that have said this is the end. And even through all of those big events and bad things and terrible things that have happened over that time period, if you'd invested $100,000 in 1976, it'd be worth over $15,000,000 today, which is around 11% annualized return during that period. So the question is really this, Do you want to satisfy your short term emotional needs and jeopardize your long term goals for your investments? That's really the question.
• 7:38
  And most of the time, will satisfy their short term emotional needs rather than stick it out and stick to the plan and make sure that they're investing on purpose. Now, that brings up a really good point in my mind. If you don't have a plan, then how are you going to stick to it? Right? So number one, you have to have a plan for what you're going to do whenever things do not go well.
• 7:57
  Right? I would say that going to cash, buying a CD, or sitting in money market for the rest of your life is probably not gonna be optimal. If we look at inflation over the last three years, we'll say that we probably break even, maybe, on our cash. Probably we're losing money. Right.
• 8:12
  So investing in cash is not really an investment. It is just a way to make us feel really good about volatility, which means we're not having volatility. But the only way to get returns that you're looking for is to withstand the volatility, meaning you have to put up with it in order to get your 10% plus annualized returns over time. So here are my suggestions. Number one, you have to create a plan.
• 8:33
  And then number two, you've got to stick to that plan. You have to have a plan that's executable, meaning you're not trying to necessarily get the highest return because to get that highest return, you've gotta withstand a lot of volatility to get it. So the best plan is one that you can actually stick to. If you don't have a plan, you need to create it. You need to make sure that you can actually stick to it once you have it built.
• 8:53
  The second thing that I wanted to say here is that we have to avoid making emotional decisions when it comes to investing. Yes, it is easy to do that. We all have emotions and we all have them either positively or negatively when it comes to who is or isn't the President, But those are terrible guides in terms of making those investment decisions. So remember, time is your friend and timing the market will not get you where you want to go. Peter Lynch once said, and I'm going to butcher the quote here, but he basically said, more money is lost trying to avoid the big event than just riding the big event out, whatever that is.
• 9:24
  So if the big market crash comes, more people are trying to avoid that, which means they're going lose more money trying to avoid it than they would during that event itself. So remember, it's better for you to stick it out, have a plan and make sure you avoid making any drastic or emotional decisions with your investments. And lastly, I wanted to say that you can win the game sometimes, but if you play long enough, you will end up losing. And here's what I mean. If you go to a casino and you take $100 in, you could win some money.
• 9:50
  Absolutely. But if you sit there long enough and you play the games long enough, you will walk out with no money. You will not beat the casino. So think of the stock market as a casino. Think of it as the thing that that will make money one way or another.
• 10:04
  Because what we're actually doing here that you should remember is that you're not investing in a president or a political party. What you're doing is you're investing in for profit companies that are trying to make money. And so if we think, regardless of the circumstances, regardless of the administration, regardless of the regulations, do we think that Apple, for example, is going to sell us another iPhone? The answer is probably yes. Do we think that we are going to have to go buy gas at the gas station?
• 10:28
  Are we going to have to go buy food at the grocery store? Are we going to have to live and stay alive? All of these things are true. We must continue to purchase goods and services and those companies that we are investing in, they are selling those goods and services. So barring the end of the world, those companies will find a way to make more money, which means we should stay invested in them because they will find a way to do it regardless of the environment we find ourselves in.
• 10:51
  There will be periods absolutely where things are slower and things are not good. But long term, it will always work out if we invest in those companies that are providing goods and services to us. So the four most dangerous words in investing are it's different this time. So hopefully this gives you some perspective around the impact of Presidents on the stock market. It's actually not as great as as you might think.
• 11:14
  And they do play a small role in overall market returns, but it's not as much weight as we often give it. So it really doesn't matter. And there's really no discernible pattern here when it comes to who is or isn't in office or which party is in leadership. So I'm going have links to all the different resources that I'm kind of referring to here in the data down in the description below. Feel free to check those out.
• 11:34
  Hopefully it's helpful for you. But during this election season, don't panic. Continue on the course you're on. Have a plan, stick to it, and remember to control what you can control. Thanks so much for tuning in.
• 11:45
  We will see you next week. Hey, it's Jacob again, and I wanted to extend a quick offer to you. If you have a question and you would like to have it answered here on the show, please email me at jacobretirementanswers dot net. And I'd love to answer that question for you right here on the show. Also, wanted to remind you that nothing discussed in today's episode is meant to be financial, legal or tax advice.
• 12:08
  Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode. I look forward to talking with you again next week.