Chart Talk: October 30th, 2024

Dennis
&
Aaron

When investing in the financial markets, you never know what to expect.  That’s why as portfolio managers, it’s crucial to stay diversified and not be too confident in any investment decision.  As such, the Presidential Election of 2016 comes to mind.  No one would’ve thought over the two months following the election of President Donald Trump, the S&P 500 would’ve been 6.16% higher.  Of course, it is easy now to look back and think Trump’s policies were good for the stock market.  However, on election night, the NASDAQ 100 fell 5% in after-hours trading – only to then reverse course and finish 1.1% higher the following day.  For those on the right gloating, let’s not forget 2020, when the S&P 500 rallied 14% over the next two months following the election of President Joe Biden. Digging down to the performance of various sectors – large-cap U.S. Growth was a star during the Trump Administration, averaging 23.9% per year.  On the flip side, commodities performed the worst, averaging -3.5% (who would've thought).  Ironically, the best performing sector under Biden was commodities averaging 15.2% annually while U.S. Treasuries brought up the rear, averaging -1.9% per year.

As is illustrated by the chart above – it doesn’t do anyone any favors mixing politics with the stock market. If you only invested in the S&P 500 during Republican Administrations, you would have reaped annual returns of 2.78%. If you only invested in the S&P 500 during Democratic Administrations, you would’ve averaged 5.20% per year. But if you stayed invested fully regardless of which party controlled the Executive Branch, you would have reaped annual returns of 8.13%. History proves that rather than focus on the party, it is financially astute to focus on the policies coming out of the White House and Congress. This change in focus will help you be better able to differentiate the leaders from the laggards.

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