Will Joe Biden Crash the Stock Market?

November 7, 2020, was an interesting day. If you’re like many, you woke up to the surprise that the Associated Press called the election in favor of Joe Biden. I know I was shocked. And, the first question I was wondered about, was, “How will the stock markets react on Monday?” I also thought, “How do democrats vs. republicans fare on the stock market”.

We say, “History repeats itself”, and at the same time when making investment decisions, we look often look to the past. Those who have been investing for a while call it “intuition”. If last week was any indication, wall street investors approved Joe Biden as President. You can see that by the weekly gain of the Dow Jones Industrial Index. The Dow Jones started at 26,691.28 on November 2, 2020 (9:30 am EST) and closed up, and 28,323.40 on Friday, November 8, 2020 (5:07 pm EST), representing a gain of 6.19% – one of the best weeks since April, 2020.

Image Credit: Google Finance

How will the markets react to a Democratic President?

Many say that presidents don’t have any effect on the stock market. However, President Trump has repeatedly taken credit when the stock markets rise. So, I wondered, what could I expect with Joe Biden as the President of the United States?

To that end, I dug deep. November 2020 is President Trump’s 46th month as president. So, I was curious, how has the Dow Jones Industrial Index performed in the first 46 months under recent presidents.

Dow Jones Performance after the first 46 Months of the past 6 presidents

As you can see from the image above, I sampled the last 6 Presidents: Clinton (D), Obama (D), Trump (R), GHW Bush (R), Regan (R), and GW Bush (R). The sample period was identical, in that it was just for the first 46 months that the presidents were in power. Interestingly, the Dow Jones Industrial Index fared much better under (recent) democratic presidents.

This interactive chart shows the running percentage gain in the Dow Jones Industrial Average by presidential term. Each series begins in the month of the inauguration and runs to the end of the term. The y-axis shows the total percentage increase or decrease in the DJIA and the x-axis shows the term length in months.

Image Credit: Macrotrends

Dow Jones Performance after 96 Months of recent Presidents

This interactive chart shows the running percentage gain in the Dow Jones Industrial Average by presidential term. Each series begins in the month of the inauguration and runs to the end of the term. The y-axis shows the total percentage increase or decrease in the DJIA and the x-axis shows the term length in months.

Image Credit: Macrotrends

As you can see from this chart, under Democratic President Bill Clinton, the Dow Jones Industrial Index went up 228.9% in his presidency. That was followed by 148.3% under Democratic President Barack Obama.

Conclusion

Past performance is not an indicator of future outcomes

Typical investing disclosure

I won’t draw any conclusions, at least not publically. Similarly, I’ll let you draw your own, in the comfort of your environment. However, at least for now, my retirement portfolio won’t keep me up at night. And as I write this message, the Dow Jones Futures are trading up, over 5%. Not a bad start to the week.

Rick

2 thoughts on “Will Joe Biden Crash the Stock Market?”

  1. Hey Rick. Where would Trump fare on that second graph or is he not listed because of the effect Coronavirus had on the markets?

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